Category Archives: Economics

>What is This Free Market We Keep Hearing About?

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>“…every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interests his own way and to bring both his industry and capital into competition with those of other men.”

– Adam Smith (1776)[1]

As President Obama and his pet Congress continue their crusade to expand the reach of government into our lives, “conventional wisdom” continues to tell us that socialized medicine, rampant wealth redistribution, and government control over one industry after another is “necessary” because of the supposed failure of the free market to adequately address the needs of society. The way the “free market” is characterized by politicians and media pundits, it is not surprising that most Americans seem to regard it as some sort of special interest group (Mr. Undersecretary, the gentlemen from the free market are here to see you). Doubtless, when most Americans hear the words “free market,” they picture the CEO’s of Detroit automakers flying in on corporate jets or Wall Street financiers busy mastering the universe. This mischaracterization of the free market is ironic, seeing as both of these groups have recently sought and obtained capital from people who were not free to refuse (taxpayers).

So, before trying to ascertain whether or not the free market has failed society, it is necessary to define exactly what it is. This is not so much difficult as it is inconvenient for those who either wish to exert control over our lives or who wish to be controlled by those that they believe can offer them security in exchange for their liberty – even if it means destroying liberty for everyone. For both of these groups, the “free market” is something that must be characterized as something that it is not. To recognize it for what it is would both threaten their own ability to justify their positions and concede to their victims that what they advocate is in fact abject slavery. Neither result is palatable to opponents of the free market, so gibberish is necessary for them from both a moral and practical perspective.

So, let us say here what it seems that no one anywhere wants to come out and say: the free market is simply all members of society exercising their inalienable rights. It is nothing more and nothing less. Any other system, by definition, violates some or all of these rights.

Every individual has a natural right to labor and to keep the fruits of his labor (his property). This is his only means of pursuing his happiness. There is only one role for government in this area: to defend the property of each individual against theft by another person or group. A truly free market limits government’s role in regards to property to this natural boundary – for any further role constitutes government committing the very crime it exists to prohibit.

Every individual has a natural right to liberty – to do as he pleases as long as he does not commit aggression against the equal rights of another. In a free market, there can be no “regulation” (as we incorrectly understand the term today). The laws that restrict human action must be limited to those few necessary to ensure that no individual is forced or defrauded while paticipating in an exchange of property nor forced to accept any terms that he does not freely consent to. As the quote from Adam Smith illustrates, one cannot talk about “free markets” without at the same time incorporating the Non-Aggression Principle of Liberty. While Smith is generally regarded as the “father of capitalism,” he never actually called his economic system by that name. Instead, he referred to it as “a system of natural liberty.” Given the confusion that now accompanies the word “capitalism,” it might be better to revert to Smith’s terminology.

Since a free market is by definition the only system that allows individuals to exercise their rights, to say that an unfettered free market does not work is to say that society will not work unless those rights are systematically violated and that those violations must be protected by the law. A greater perversion of justice is unimaginable. Yet, the majority of our elected officials champion exactly this. Sadly, the majority of their constituents blindly parrot their horrific slogans.

In response to this argument, the more cunning opponents of liberty will say that we have given the free market a chance to work and it has failed. False prophet of freedom Alan Greenspan is notable among this gang of vipers. However, any lucid analysis of the difficulties that we find ourselves in now can indisputably be traced to the aspects of our society that prevent free markets. Bad mortgage loans were made because government committed the fraud of monetary inflation combined with the theft of guaranteeing loans with taxpayer money. The skyrocketing cost of health care is a result of government committing the theft of taking money from one individual and using it to buy health care for another, suspending the natural law of supply and demand with artificial demand. Contrary to the idea that individual rights must be balanced with societal needs, it is the violation of individual rights that causes all of our societal problems, most pervasively our economic problems.

As it is merely the economic application of the Non-Aggression Principle of Liberty, the free market is the only system that allows individuals the ability to exercise their right to pursue their happiness. By doing so, they naturally seek to profit from their labor and compete with each other without committing aggression against each other’s rights. History shows that individuals acting in this manner produce enormous benefits for their fellow human beings. The steam engine, the automobile, the airplane, the telephone, and virtually every other technological advance that provides a tangible improvement in the quality of human life have been the result of human beings peacefully competing with each other for profit.

Conversely, the atomic bomb, the concentration camp, and every other technology which serves the purpose of death, destruction, and enslavement have been the result of governments forcefully confiscating property from their citizens which would otherwise have been put to productive use.[2] It has only been by violating the individual, inalienable rights to life, liberty, and property that any of these horrors were able to come to fruition.

The free market has not failed. The free market is Freedom itself, and while it has only occurred for brief moments throughout history, it has never, will never, and can never fail. When we are confronted with gibberish about the failure of free markets and the need for government to “play a role in the economy,” or for a “public-private partnership,” let us not let ourselves be led into a carefully framed argument about what might provide more health care, produce more automobiles, or save more jobs. Let us recognize these arguments for what they are: a declaration of war upon our inalienable rights.

As our Declaration of Independence states, government’s purpose is to secure our rights, including our inalienable right to a free market within which to exchange our property. Whenever any Form of Government becomes destructive of this end, it is our right and our duty to alter or abolish it. Not only must we resist further government expansion into our economy, we must begin dismantling the institutions of tyranny that government has already established over the past century. Our representatives must hear this from us every day until they call off their attack upon our rights or until they can be removed from office. There is nothing in any of our lives that is more important than this right now.

Check out Tom Mullen’s new book, A Return to Common Sense: Reawakening Liberty in the Inhabitants of America. Right Here!
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[1] Smith, Adam An Inquiry into the Wealth of Nations from An Inquiry into the Wealth of Nations: Selections edited by Laurance Winant Dickey Hackett Publishing Indianapolis, IN 1993 pg. 165
[2] The reader should avoid confusing private companies developing weapons for the government with “the free market.” The fact that the companies are privately owned does not mean that they are operating in a free market. Quite the contrary. Since the buyers of their products do so involuntarily (taxes), the development of new weapons and subsequent sale of them to the government has nothing to do with a free market.

>A Nation of Hyenas

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>One never knows where one will find profound metaphors for human existence and society, and I certainly wasn’t looking for one while channel surfing last weekend after a morning of yard and house work. However, I had the good fortune to flip on Mutual of Omaha’s Wild Kingdom and observe a perfect analogy to what our once-great society has become.

That episode was about the cheetah, the fastest land animal on earth. The cheetah is a beautiful creature. As the show pointed out, it is literally built for speed at the expense of brute strength, of which it has relatively little compared to other predators in its habitat. While unfortunate for the antelope, it was nonetheless quite inspiring to watch a high-speed pursuit of that animal by the cheetah, exhibiting gracefulness which rose to the level of poetry. Having made her kill, the cheetah brought the antelope back to feed herself and her young.

However, the story was not to end so happily for this family. The smell of blood in the air had attracted a pack of one of the cheetah’s competitors, the hyena. While the aforementioned lack of brute strength would probably not allow the cheetah to fight off even one hyena, that fact was irrelevant in that it was ten or twelve hyenas which now threatened her. Why? They were after the antelope – the fruits of the cheetah’s labor – and were going to use their greater numbers to take it from her by force. They weren’t intent upon killing the cheetah or her young, but were willing to do so, if necessary, to obtain her property without her consent. The cheetah weighed the risks to herself and her cubs and retreated, left to try to make up the loss elsewhere to provide for her family.

A few nights later I broke an embargo of sorts and actually watched a “news” program. I tuned in Cavuto on Fox News[1], which is one of the few shows where actual journalism seems to occur occasionally, despite its network affiliation with right wing propagandists Hannity and O’Reilly.

Cavuto’s regular panel of guests is arguably the most libertarian one can find anywhere in the “mainstream media,” regularly featuring Jonathan Hoenig, Peter Schiff, and even Yaron Brook, President of the Ayn Rand Institute.

That night, the auto company bailouts were again on the docket, and familiar arguments were made by Hoenig and the other panelists about why the results would be worse if the government took control of the auto industry. Cavuto’s token panelist from the left[2] (a female panelist whose identity I have been unable to verify), made the now also-familiar argument that “we bailed out Wall Street and now Main Street is demanding that the government do something for them.” Most of the panelists answered correctly that they were against the Wall Street bailouts as well, a point that was left unemphasized due to several people talking at once. However, the real chance for a meaningful debate still lay ahead. The boisterous Cody Willard set the stage when he said, “if you want to help them, send them your money, but don’t hold a gun to my head.”

The reply from the panelist arguing the liberal perspective was monumental:

“That’s why we have a democratically-elected government and the people want the government to do something.”

When she gave that answer, it was time to stop the quips, the witticisms, and even delay going to a commercial, if necessary. Despite the fact that the host trivialized the exchange by talking over part of both her and Willard’s comments, the exchange between the two was enormous beyond what most viewers probably realized.

There are many who would probably consider Willard’s statement a half-facetious exaggeration for effect. It was not. It is the horrifying reality of what any government bailout or other redistribution of wealth represents. We as Americans have forgotten that all government action is exercised under exactly these circumstances: at gunpoint. That is the purpose of government, to exercise brute force on behalf of its constituents when it becomes necessary to do so. That is why our government was originally so limited. The founders of our nation believed that brute force was only justified in self defense. Therefore, government action was limited to protecting its constituents from harm by other people, whether it was harm by a fellow citizen or a foreign army.

However, when the government undertakes to “do something” about a failed bank or auto company, it really means that We the People have decided to apply brute force to the problem, even though it is not a matter of self defense. Willard was completely accurate: a government bailout of a distressed auto company, whether it saves jobs or not, is really the people using their collective means of brute force (the government) to take property from one group of people and give it to another. This exchange is done at gunpoint – there is no consent by the party being taken from. Had the managers or the employees of the auto company armed themselves and sought to raise the funds themselves by stealing them at gunpoint from the people directly, they would have been arrested and prosecuted for armed robbery. However, Willard’s opponent in the debate argues that there is some ethical difference because a “democratically-elected government” acts as the armed robber in their stead. What can the difference possibly be?

This is the fundamental question that we as a society must answer if we are ever going to reverse the downward spiral we find ourselves in. Do we believe that individuals have inalienable rights or do we believe that a majority vote can take those rights away?

If one takes an objective look at our society as it has evolved over the past century, one must conclude that we have already answered it. Stripped of euphemism, almost every government institution in our society amounts to us using the brute force of government to violate the inalienable rights of our neighbors. Let us consider just a few examples.

Government involvement in healthcare has driven the price so high (through the artificial demand it creates) that the poor and elderly cannot afford it. Our answer is to apply the brute force of government to steal the money at gunpoint from one group of people to provide healthcare to another. In a truly bizarre development, that practice has now resulted in such high prices that almost no one can afford healthcare. So, we will now steal from everyone to provide healthcare for everyone. Lewis Carroll couldn’t have dreamed of anything quite so mad.

In order to be able to stop working but still enjoy the quality of life we feel we deserve after a certain age, we use the brute force of government to steal from those who are still productive to support those who are not. We could save for our retirement, but we choose instead to steal. We call this “Social Security.” It should be called, “Anti-Social Insecurity.”

Similarly, in order to afford to buy a house without saving the necessary down payment and establishing superior credit, we use the brute force of government to compel our neighbors to guarantee our mortgage loans with their money. When the inevitable tsunami of defaults occurred last summer, some objected to the government stealing the money to cover the losses of the banks. In truth, the money had been stolen decades ago, the minute that Fannie Mae was established.

Rather than saving the money for college tuition or allowing our children to work their way through college if we cannot afford to pay the tuition in full, we use the brute force of government to compel our neighbors at gunpoint to guarantee our student loans with their money. As with healthcare, this evil practice has driven the price of college tuition so high that not only are students going into long-term debt just to pay for their education, but their parents are taking out decades-long loans as well.

Should fortune not smile upon us or should we not develop marketable skills with which to obtain employment, we use the brute force of government to steal the money needed to sustain us from our fellow citizens. We call this the “social safety net,” but it also should be recognized as “anti-social.”

If we believe that we have a scientific theory that could lead to a new discovery that will benefit society (and enrich ourselves), we do not seek out capital to research it from those who can provide it voluntarily. We use the brute force of government to steal the money from our neighbors with the flimsy justification that “federal funding of research” will “benefit all of society” with a new medicine or a new technology.

This is by no means the length and breadth of the ways in which we violate each other’s rights on a daily basis. Every program funded by government, besides those that have the express purpose of defending our rights (police forces, the courts, the military), amount to the same thing: using our collective means of brute force to extract money from one group and give it to another.

What should be obvious is that it is not one evil group (the poor, the elderly, the corporations, Wall Street, etc.) that engages in this morally repugnant practice. Politicians will pick their scapegoats to play to their own power bases. The Republicans will blame the poor to get votes and campaign contributions from their base, the corporations and the rich. The Democrats will blame the rich and the corporations to get votes and campaign contributions from their base, the unions, average Americans, and the poor (the poor have only their votes to give and get back only the most miserable portion of the loot).

However, we must wake up to the fact that we all have a hand in this. The steady growth of one redistribution scheme after another has made it virtually impossible to function in our society without in some way participating in the looting of our fellow citizens, while we are at the same time looted ourselves. We have established all of these redistribution schemes through the democratic process. This past century has not been a progressive century. It has been a regressive one. We have regressed from a society of free people that respect each other’s inalienable rights to a society that is based upon competing groups stealing from one another through the brute force of government. We use only the support of greater numbers (majority vote) to justify the institution of each new crime. We have regressed to the brutal law of the jungle. We have become a nation of hyenas.

This has all followed logically from one fundamental break we made from our founding principles. We have elevated democracy to an ideal, at the expense of the individual rights that our government – and any government of free people – was constructed to protect. We have convinced ourselves that anything a majority vote sanctions is just, even if it violates those rights. Once we accepted that premise, the seeds of our destruction were sown.

As one might expect, this is something that the founders of our nation warned us specifically against. When one takes an objective look at our founding documents, the first thing that should jump off the pages is how little democracy there really was in our original government. Only the House of Representatives was chosen directly by the people, with the president and senate chosen indirectly by electors or the state legislatures, respectively.

More importantly, it is vital to realize what all of the limits, checks and balances, and even the Bill of Rights were intended to protect us from. They were intended to protect us from democracy.

One does not need to engage in interpretation to support this claim. The founders said it explicitly on more occasions that one could count. Here are just a few examples:

“Democracy is the most vile form of government … democracies have ever been spectacles of turbulence and contention: have ever been found incompatible with personal security or the rights of property: and have in general been as short in their lives as they have been violent in their deaths,”[3]

“The majority, oppressing an individual, is guilty of a crime, abuses its strength, and by acting on the law of the strongest breaks up the foundations of society.”[4]

“There is no maxim, in my opinion, which is more liable to be misapplied, and which, therefore, more needs elucidation, than the current one, that the interest of the majority is the political standard of right and wrong.”[5]

These vitriolic attacks upon democracy and majority vote from the founders of our nation would probably surprise most Americans. Nevertheless, there they are. The founders understood that democracy was a means, not an end. Their end was protection of the inalienable rights of each individual. Democracy was only good and just insofar as it helped to defend those rights. Furthermore, it must be prevented from being used to violate them. Again, the founders said this explicitly.

“In short, it is the greatest absurdity to suppose it in the power of one, or any number of men, at the entering into society, to renounce their essential natural rights, or the means of preserving those rights; when the grand end of civil government, from the very nature of its institution, is for the support, protection, and defence of those very rights; the principal of which, as is before observed, are Life, Liberty, and Property. If men, through fear, fraud, or mistake, should in terms renounce or give up any essential natural right, the eternal law of reason and the grand end of society would absolutely vacate such renunciation. The right to freedom being the gift of God Almighty, it is not in the power of man to alienate this gift and voluntarily become a slave.”[6]

This passage elucidates another conclusion that proceeds from natural law. Not only is each individual prohibited from using the majority vote to violate the rights of his fellow citizens, he is prohibited from using that vote even to relinquish his own rights. That is because rights are not granted by society. They are inherent in man’s nature itself. They are non-transferable. They cannot be taken or even given away. That is the meaning of “inalienable.”

It was at the turn of the last century that we made the fundamental change in our philosophy. Since that time, we have held democracy up as our ideal at the expense of our natural rights. We did this primarily to justify the routine violation of one specific right: property. It is no accident that as democracy has become more and more extolled as an ideal, property has become more and more reviled. We have even had professors in American universities teach their students that “property is theft.”

Of course, like the hyena, we really do not care what our fellow citizens say or believe. We will not expend much energy in violating their rights to free speech or freedom of religion, because in the end we have nothing to gain from violating those rights. However, by violating their rights to the fruits of their labor, we do gain enormously at their expense. This is the true danger of democracy. We must face up to this plain fact and stop talking about everything but property. As Adams also said, “Now what liberty can there be where property is taken away without consent?”

We are at a crossroads. The system we have built upon the brutal law of the jungle is about to collapse. We are presently suggesting even more brute force (government) to try to preserve it. If we continue on this course, the relationship between predator and prey on the African savannah will seem civilized compared to the state of our society. Unfettered democracy – not unfettered capitalism – has brought us here. We must choose respect for our inalienable rights over the loot that unfettered democracy can provide us with. If not, we must admit to ourselves that the way in which we live and deal with one another is no different from that of the savage beasts of the jungle. A return to our founding principles is our only hope.

Are we not men?

Check out Tom Mullen’s new book, A Return to Common Sense: Reawakening Liberty in the Inhabitants of America. Right Here!

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[1] “Cavuto” Fox Business News May 27, 2009.
[2] While hard-core progressives might call her a “Fox News Liberal” for even appearing on the hated network, her role on this telecast was without question to argue the liberal side of the issue.
[3] Madison, James Federalist #10
[4] Jefferson, Thomas To Dupont de Nemours Washington ed. vi, 591 1816
[5] Madison, James Letter to James Monroe October 5th, 1786
[6] Samuel Adams The Rights of the Colonists (1772) The Report of the Committee of Correspondence to the Boston Town Meeting, Nov. 20, 1772 Old South Leaflets no. 173 (Boston: Directors of the Old South Work, 1906) 7: pg. 419.

The Myth of the Laissez Faire President

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P20315-10a.jpgIt is generally accepted that one must wait several decades before looking back at an event or an era with sufficient “historical perspective.” Only from that vantage point can the significance and long-term effects of any piece of history be objectively observed, quantified, and analyzed. However, there is a dilemma inherent in this long-standing tradition. It is that there are always interested parties who wish to characterize significant events or eras in history in a way that suits their own agenda. As a result, by the time sufficient time has passed to satisfy the need for “historical perspective,” these interested parties have created an official story regarding the events in question and have had time to convince the majority of people that this official story is the truth. By the time a generation has passed, the official story has become both accepted history for academia and “conventional wisdom” for average citizens. Regardless of facts, reason, or any perspective whatsoever, the official story now is the truth.

Such has been the case countless time throughout American history. It is universally accepted that America’s Civil War started over slavery, and credits Abraham Lincoln with “freeing the slaves.” History and conventional also wisdom tells us that the quality of life of the working class in America declined during the industrial revolution, and credits the “progressive movement” for instituting needed reforms that saved the working class from capitalism. Most relevant to our situation in America today, history blames the Great Depression of the 1930’s on Herbert Hoover’s “laissez faire capitalism” and “unregulated free markets,” and credits FDR’s New Deal with ending the Depression and restoring prosperity.

When presented in the textbooks of high school history or college survey courses, there is a certain logic and reasonableness to these versions of historical events that makes them very easy to understand and accept. There is only one problem: none of them are true.

Americans are already familiar with the official story of our present crisis. Too much laissez faire capitalism” has resulted in an unprecedented crisis caused by predatory lenders, irresponsible borrowers, speculators, and other market participants acting in an environment with too little regulation. Without oversight, “unregulated free markets” naturally resulted in market players choosing short term profits over long-term prudence. This process was fueled during the past decade by George W. Bush’s “laissez faire policies.”

There is only one problem with this story – none of it is true, either. None of the problems we face today were caused by unregulated free markets and the policies of George W. Bush were in no way “laissez faire.” This is much more than an academic argument. The premise that unregulated capitalism is to blame for our present economic crisis is the basis for every action that our government is taking right now. If that premise is incorrect, then the results of action taken based upon it could be disastrous.

It is probably a good idea at this point to define some terms. Assuming that “laissez faire capitalism” and “free markets” mean the same thing, what I mean when I use those terms is this: a market economy where all exchanges of property are made with the mutual, voluntary consent of all parties to those transactions. While government’s role is limited in such a system, it is nevertheless crucial: to ensure that all transactions are made with the mutual, voluntary consent of all parties. To put it most succinctly, government’s role in a free market is to protect the property rights of each individual.

Is this what George W. Bush did or at least attempted to do? Let us examine the Bush economic policies and see for ourselves.

Bush campaigned on and did follow through upon a promise to cut taxes. He did this by reducing the income tax on the highest income earners and by sending each American family a “refund” of several hundred dollars. One might be tempted to argue that this was a move in the direction of free markets, as the returned money represented reductions of a government that had grown far beyond its role of defending life, liberty, and property. Thus, the tax money collected for these illegitimate functions was a violation of the property rights government was supposed to protect and the tax cuts were a partial remedy for those violations. This is what any self-respecting Republican would have you believe.

There is only one problem: there were no reductions in government. In fact, Bush greatly increased the size of the government with military and new entitlement spending. As a result, he ran huge deficits and doubled the national debt. Looked at objectively, there was a tenuous relationship at best between the money taxpayers had previously paid in taxes and the checks sent out by the government after all of that tax money was already spent. Furthermore, millions of Americans who hadn’t even paid taxes received “refund” checks anyway. Seen for what it was, this “tax refund” was merely a ploy to buy votes with other people’s money dressed up in Republican rhetoric, as well as a way to perpetuate debt-fueled consumerism for the benefit of President Bush’s friends in corporate America. Handing out money to people to whom it doesn’t belong has nothing to do with free markets, whether that money is borrowed from other nations or printed out of thin air. It represents complete distortion of the markets by government, along with a fundamental violation of the property rights of present and future generations.

Amidst this confusion we seem to have forgotten one major contributor to the aforementioned deficits: the Medicare drug plan. The Medicare drug plan was the Bush administration’s program from start to finish, and it was rammed through the legislature despite its dubious administrative plan and complete lack of funding. While it was rightly criticized for both of these faults, no media outlet seems to have recognized its complete antagonism toward free markets. In addition to violating property rights by forcing one group of individuals to pay for the healthcare services of others, Medicare and other government health care programs completely distort the health care market, creating artificial demand that inflates prices and suspends market forces. Here we have another major component of President Bush’s policy that is the complete antithesis of laissez faire capitalism.

The mass illusion about this president’s policies doesn’t stop there. The American public also seems to think that major deregulation occurred under President Bush, but actually the exact opposite is true. Even the Gramm-Leach-Bliley Act (repealing the Glass-Steagall Act), often mistakenly blamed for  the massive expansion of derivatives that helped fuel the housing bubble, was actually passed when President Clinton was still in office. Bush’s only significant effect on the regulatory structure was to increase regulation, not decrease it.

Due to the political fallout from the accounting scandals during the early years of Bush’s presidency, especially the Enron scandal, Bush championed new, completely unnecessary, and profoundly destructive regulations under the Sarbanes-Oxley act. Despite the fact that the accounting scandals were clear cases of fraud, which was already illegal and which was prosecuted without a single new regulation, President Bush had a political need to show that he was “doing something” about corporate crime.

So, again in complete opposition to “free markets,” Bush signed Sarbanes-Oxley into law, saying as he did so that the bill represented “the most far-reaching reforms of American business practices since the time of Franklin Delano Roosevelt.”[1] Invoking FDR should have been enough on its own to erase any perception of Bush as a champion of free markets, but the hated “laissez faire” moniker seems to be a tough one to shake. As we now know, the Sarbanes-Oxley Act has been terribly destructive to American markets and has contributed to a migration of new investment away from America and to more business-friendly countries. Chalk up another victory for Bush against free markets.

Finally, there is Bush’s role in the housing bubble, the straw that broke the proverbial camel’s back regarding America’s borrow and spend economy of the past several decades. Here it should be noted that the lion’s share of the blame for this debacle should go to the Federal Reserve System, which kept interest rates artificially low and expanded money and credit to counter what would have been two recessions in the late 1990’s and early 2000’s. Remember, the private Federal Reserve System does not answer to any branch of the federal government. One could certainly argue that both Clinton and Bush merely happened to be in office while the Federal Reserve blew up two massive bubbles during their presidencies (the NASDAQ bubble and the housing bubble).

However, it was not just low interest rates or the expansion of money and credit that caused the housing bubble to inflate. There was also the role of government-sponsored enterprises Fannie Mae and Freddie Mac, which guaranteed mortgages that would not have been written in a free market. Starting with Clinton and continuing with Bush, the executive branch played cheerleader to the “ownership” society whereby every American was entitled to own their own home, whether they could afford the mortgage that went with it or not.

The mortgage debacle is often cited as an example of the “unregulated free market” producing negative results. Since both the “predatory lenders” and the “irresponsible borrowers” were acting voluntarily, the millions of subsequent defaults are characterized as the result of too little regulation on the market, allowing these freely-acting participants to eschew prudence for short-term profits. However, this analysis omits one very important fact: there were not two parties to most of these mortgage transactions, but three.

The forgotten third party was, of course, the taxpayer. It was the taxpayers’ money that was put up as collateral for the loans guaranteed by Fannie Mae and Freddie Mac, and the taxpayer was not acting freely. The taxpayer was forced by government to back these loans without his consent and against his best interests. Had the government not committed this crime against property rights to serve its goal of an “ownership society,” none of the defaulting loans would have been made.

In a truly free market, the desire for profit is balanced by the presence of risk. When one is lending one’s own money, the possibility that the borrower will default forces the lender to adhere to high lending standards to avoid making a bad loan. This is not done out of some civic duty or professional integrity (not that many lenders don’t possess both of these qualities), but out of recognized necessity for economic survival. The balance between desire for profit and risk is a naturally occurring market force when all participants are acting voluntarily in their rational self interest. However, by allowing lenders and borrowers to use other people’s money as collateral, this natural market force was suspended. To go on to call the resulting disaster the result of “unregulated free markets” is nonsense in the first degree.

Ironically, Clinton and Bush each pursued the exact same policy regarding the housing market for very different reasons. Clinton pressured Fannie Mae to take more and more risk in order to play to his base: low-income Americans who would not qualify for a mortgage in a truly free market. Bush went right on encouraging the process in order to appease his base: Wall Street investment houses that were making a killing securitizing mortgages. Regardless of the motivation, what is important to realize is that this policy is completely antithetical to the concept of free markets or laissez faire capitalism.

Of course, once the crisis began, most people recognize that nothing President Bush did could be characterized as “laissez faire.” Bush himself admitted that he was abandoning free market principles because “the market is not functioning properly,” a bizarre statement from one who supposedly believes in free markets in the first place. His massive intervention into the economy and egregious redistribution of wealth are characterized by the media as a departure from his previous “laissez faire approach.” Yet, anyone can see that this “laissez faire approach” was complete fiction. So why do all but a few contrarians keep saying it anyway?
There is an answer to that question. Characterizing Bush’s policies as “laissez faire” does serve a very useful purpose for politicians. It provides them with justification to loot more property and seize more power. The all-out war on free enterprise presently being waged by President Obama and his cohorts in Congress would not be possible if most Americans did not believe the official story that Bush’s presidency was an era of “laissez faire capitalism” or “unregulated free markets” and that these policies caused the economic crisis. Only the continued willingness by the majority of Americans to swallow this economic gibberish allows the destruction of our liberty to march forward.

To my fellow Americans, I say this: No politician (save perhaps one) is going to come forward and tell you the truth. Most of them don’t know the truth, and those that do have figured out that this official nonsense serves their own ambitions, just as saying that the world was flat once served the ambitions of medieval rulers. It is up to you to rub your eyes and look at the world as it really is. Two plus two does not equal five and you know that. Similarly, people voluntarily exchanging their own goods and services with one another can never cause anyone harm and deep down you must know that, too. It is time to reject the idiotic history that is being written about our present difficulties and demand that the evil incursions into our liberty cease immediately. You have enormous power when you know what to demand. It all starts with recognizing the obvious despite the well-funded efforts of those who wish to deceive you. As the good book saith, the truth shall set you free.[2]

[1] Bumiller, Elisabeth (2002-07-31). “Bush Signs Bill Aimed at Fraud in Corporations“. The New York Times
[2] John 8:32

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

>Claire Morrissey Interviews Tom Mullen

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https://www.youtube.com/watch?v=Yq-mvaGZ8Ak&feature=channel

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>The Forgotten Right

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>“The moment the idea is admitted into society that property is not as sacred as the laws of God, and that there is not a force of law and public justice to protect it, anarchy and tyranny commence. If ‘Thou shalt not covet’ and ‘Thou shalt not steal’ were not commandments of Heaven, they must be made inviolable precepts in every society before it can be civilized or made free.”

– John Adams (1787)[1]

It is starting to become apparent to even the most disinterested observer that something much bigger than even a worldwide recession is happening. The seeds of revolution have taken root. Iceland led the way by taking to the streets to force regime change through peaceful demonstration. The French are currently protesting en masse against their government’s bailout of the banking system. One would be naïve to think that these are isolated incidents. It is apparent that these are just early warning signs of a worldwide cauldron that is about to boil over, catalyzed by the financial and economic cataclysm that will plunge untold millions into poverty and desperation.

While I applaud the peaceful demonstrations going on in France and Iceland, I also recognize that they are premature. As did Americans in the last election cycle, these Europeans are demanding “change.” However, also like Americans in the last election cycle, they have failed to first answer the crucial questions, “From what? To what?” They have not looked within to assess who they are, what their society is, and what they want it to be. Therefore, they run the risk of simply replacing one oppressive tyranny for another.

Likewise, we will never regain our freedom in America until we address the fundamental problem in our society. I say “the problem,” because at the root of all of what we perceive as a myriad of problems, including the police state, the welfare state, the warfare state, the military industrial complex, the Wall Street oligopoly, the high cost of healthcare and education – everything – there is one philosophical problem that ultimately leads to them all: the repudiation of property rights.

It is likely difficult for most 21st century Americans to absorb this statement, based upon the fact that they have been told now for generations that property is about greed, that accumulating property is oppression, or even that “property is theft.” However, let us look back at the philosophers who inspired our founders and see what they have to say about property. Of course, as I have written here, the primary philosophical basis for the American Revolution came from Locke. What did Locke have to say about the purpose of government?

““The great and chief end, therefore, of men’s uniting into commonwealths, and putting themselves under government, is the preservation of their property.”[2]

Certainly this statement must be startling to most 21st century Americans, who believe that they are supposed to look to their government to fight unemployment, manage the economy, ensure access to healthcare, promote democracy abroad, and pursue a myriad of other ends outside of protecting property. Surely, Locke has over-emphasized property rights here, has he not? Certainly he is alone in his simplistic assessment of the role of government, is he not?

He is not. In seeking guidance on how to construct our government, the American founders also looked to the ancients, particularly the Roman Republic. There, we find Cicero writing,

“For the chief purpose in the establishment of constitutional state and municipal governments was that individual property rights might be secured. For, although it was by Nature’s guidance that men were drawn together into communities, it was in the hope of safeguarding their possessions that they sought the protection of cities.”[3] [emphasis added]

The conditioned response of Americans today is to view these ideas as a defense of one class of people at the expense of another. We have been trained to associate “property” as a concern of the “property class,” or in more common American terms, “the haves,” as opposed to the “have nots.” This is a great deception that has lead directly to our ruin. In fact, it is the poor and those of modest means for whom property rights are most important. It is they who, not possessing significant material wealth, must all the more jealously guard the property that they do have. In the end, however, we are all property owners when one considers the most fundamental, most important property of all: our labor itself.

We learn from Locke that all property has its roots in labor. In order to survive, man must work to produce the means of his survival. This is true for people no matter what their financial circumstances. The doctor, the lawyer, the construction worker, the janitor – yes, even the Wall Street financier – must sell his efforts to his fellow man in order to acquire the means of his survival. Therefore, whoever has control over the individual’s labor has control over the individual’s life, and control over the individual’s future. If I steal all of your possessions, you can acquire more. However, if I appropriate your labor, I own all of the property you can ever or will ever acquire. This is an undeniable reality that we have lost sight of, to our peril.

America was founded upon the idea that each individual had an unqualified right to the fruits of his labor.[4] This more than anything was what the founders meant when they spoke the word “liberty.” It was the extent to which this right was respected that made America different than every other society in history, before or since. This was the great secret that made America the engine of prosperity and innovation that it was. This is what made America the land of opportunity to change one’s lot in life. It was this right that gave birth to the American dream.

However, we no longer hold this right up above all others. Instead, we have become a society that is based upon competing groups seeking to plunder each other via the force of government. The rich plunder their neighbors with corporate bailouts, subsidies, and regulatory fascism. The middle class plunder their neighbors with Social Security, Medicare, and criminal unions. The poor are forced to accept legal plunder that they do not want and which provides them with the most miserable quality of life, when the stolen capital that underwrites it could employ them all if it weren’t seized from its rightful owners. Of course, these examples are only the tip of the iceberg; there is much, much more. Virtually every political movement in America is based upon a promise to provide its followers with other people’s property.

This scenario is neither unprecedented nor has it been unrecognized by the great lights of liberty. Bastiat wrote,

“Men naturally rebel against the injustice of which they are victims. Thus, when plunder is organized by law for the profit of those who make the law, all the plundered classes try somehow to enter — by peaceful or revolutionary means — into the making of laws. According to their degree of enlightenment, these plundered classes may propose one of two entirely different purposes when they attempt to attain political power: Either they may wish to stop lawful plunder, or they may wish to share in it.”[5]

This vision of Bastiat’s has become reality in America. However, it cannot go on forever. Fortunately for humanity, a society based upon legal plunder is ultimately unsustainable. Just as respect for property rights provides the means to prosperity, violation of them leads to poverty and want. As force replaces voluntary exchange, productivity decreases, and subsequently more force is required to plunder even more. This cycle repeats until society is reduced to an authoritarian nightmare, the first signs of which are becoming apparent in the former “land of the free.” If the people wake up, the nightmare can end. If they continue to slumber, the nightmare can get much, much worse.

This is the great truth that we must rediscover before any revolution can be successful. Before we commit to “change,” we must answer the questions, “From what? To What?” The answers to those questions must be “from a nation of looters to a nation of free individuals who acquire property in the only civilized manner: via voluntary exchange.” We must reject the use of force as the means to pursue our happiness, and renew our faith in freedom. Once this great work has been accomplished, let the revolution begin.

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Check out Tom Mullen’s new book, A Return to Common Sense: Reawakening Liberty in the Inhabitants of America. Right Here!

[1] Adams, John A Defense of the Constitutions of Government of the United States of America (1787)
[2] Locke Second Treatise Ch. IX, Sec. 124
[3]Cicero, Marcus Tullius De Officiis Book II Chapter XXI
[4] “Individuals” who were included in the system. Of course, the founders recognized but did not remedy the obvious contradiction to this inherent in slavery.
[5] Bastiat, Frederic, The Law

>Housing in the New America II: The Stage is Set

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>“Abolition of private property and the application of all rent to public purpose.”

– Karl Marx and Friedrich Engels (1848)[1]

Just after the abominable housing bill of this past July, I wrote an article about the very real prospect of the government getting into the property management business, due to the nationalization of the mortgage industry that effectively occurred when the government seized Fannie Mae and Freddie Mac. The scenario was admittedly conjectured, but unfortunately it seems to be playing out even worse than I could have imagined (and I can imagine pretty bad from our government). An article in the New York Times put one more piece of the puzzle in place.

Keep in mind that the real devastation of this economic crisis has not really occurred yet. We still don’t have double digit unemployment (at least using the government’s numbers), but that is inevitably what is coming. Right now, we have unemployment that is setting records for one-month growth, but we do not have tens of millions of Americans out of work. That makes today’s news all the more disturbing.

If you have any experience with rental properties, as either a landlord or a renter, you know that when a rental property goes into foreclosure, the tenants are routinely evicted. It is much easier to sell a foreclosure property without tenants, among other reasons because choosing tenants is one of the skills that separate successful landlords from unsuccessful ones. Good landlords also usually want to do some renovation to the property, which is at least inconvenient and to some extent virtually impossible with the property already occupied. The justification for the eviction is, of course, that the property now lawfully belongs to someone else (the bank), who never consented to the rental agreement and has every right to refuse to honor it.

Or do they? According to the Charles Duhigg of the Times, Fannie Mae announced today that it would “sign new leases with renters living in foreclosed properties owned by the company.” Of course “owned by the company” is an ironic choice of words, because “the company” is none other than the U.S. government. While my previous article envisioned Section 8 as the possible vehicle for converting large percentages of the (former) middle class into government tenants, this new policy today goes one step farther. Section 8 uses public funds to subsidize rent payments to private owners of rental properties. This policy represents renters making rent payments directly to the U.S. government, for the “privilege” of living in government-owned[2] homes. While the numbers for homes owned outright by Fannie Mae are small at the moment, it is no less a watershed moment.

Of course the policies of Fannie Mae are not binding upon the so-called “private sector” (is there still one?), at least not yet. As the Duhigg reports,

““We’re not in the business of managing rental properties, and we’re not in the business of being a landlord,” said Thomas Kelly, a spokesman for JPMorgan Chase, which owns about two million loans. “Clearly the renter is caught in the middle in cases like this. When a property is in foreclosure, we follow the law.”[3]

It is somewhat amusing that a representative of J.P. Morgan Chase would speak so reverently about the law, as if it were some bastion of property rights and justice. Having been the beneficiary of the lion’s share of the largesse during the financial sector bailouts, this bank should know better than anyone that the law and justice no longer have much to do with each other. If property rights get in the way of some new government theft, a law is simply passed to eliminate the obstacle. Having eschewed the concept of republican government in exchange for “democracy,” there are now no rights that cannot be violated, as long as a sufficient number of votes can be raised among elected representatives. Indeed, our government does not really recognize “rights,” which transcend government. It grants privileges and erroneously refers to them as rights.

I doubt that private sector banks will retain the privilege of evicting tenants from the properties they acquire in foreclosure for very long, once the new presidential administration and Congress take office. Already, the cries for “fairness” are beginning to be heard. As the Times article reports,

“Some lawmakers and housing advocates say such policies are unjust.
“If your loan is owned by Fannie Mae, you get to stay in your home. If your loan is owned by someone else, you’re on the street,” said Mr. Taylor of the National Community Reinvestment Coalition. “These banks need to realize they’re in the property management business now, whether they like it or not.”[4]

Note the use of 21st century coercion-euphemisms. Any statement beginning with “You need to…” is one that could just as well start with “I ORDER you to…” At least the tyrants in centuries past made such statements with swords drawn and pointed at their victims. Today’s authoritarianism with a smile is actually more horrifying.[5]

With all of the travesties of justice taking place during this blackest of years in our history, one might argue that insisting that banks retain the right to put renters out on the street represents confused priorities. Perhaps so. However, one thing is certain. The line was already blurred regarding the right to own property before this, as the government could seize it from you merely for being unable to pay its property taxes. Now that the banks (and soon anyone buying properties in foreclosure) have no say over who lives in the house that they just bought, that line has become a smudge at best. In reality, there really is no such thing as homeownership. Government merely grants the privilege of stewardship over ITS homes. This latest farce merely makes that fact clearer.

So much for the moral considerations on this issue. I seem to have been far less efficient in confronting them than the government, which breezed right on by them. Who says it can’t get things done quickly?

As far as unintended consequences, this latest bit of idiocy is so ripe with them that it is hard to know where to begin. I am not sure who truly manages these properties, now that they are the property of the government but still occupied. Who does the tenant call when the sink starts leaking? If you think you see a program like Medicare or Medicaid coming, you’re not alone. We could always use another network of overpaid providers rendering sub-par service at a cost of hundreds of billions of dollars to taxpayers. Worse yet, as more and more average Americans wind up in government-owned or subsidized homes, the program to pay handymen to do repairs could grow into an institution, just like the aforementioned medical programs. Among other negative consequences, this will tend to push the prices for these repairs through the roof for everyone, just as government-provided medical care and student loans push up the cost of healthcare and tuition for everyone. Let’s hope the government doesn’t start providing beer – we can’t afford bubble prices for that in times like these!

Of course, the glaring weakness in this latest move has to do with the central issue – selling the foreclosed properties. The whole reason behind lenders taking possession of a property when the borrower defaults is to sell that property and recover some of the losses on the loan. This new policy of Fannie Mae’s, which will almost certainly become a law sometime during the next Congressional term, will only prolong the time that these properties are on the market. Far less buyers will be willing to acquire properties if they are forced to take their chances on a tenant that they haven’t personally vetted, and on a property where their options are limited in terms of what they can do with it after they acquire it. This fits the FDR pattern of intervening into the markets and preventing a needed correction perfectly. The market is trying to liquidate these properties and allow them to be sold at more reasonable prices to more viable customers. The government policy will arrest that process, causing the crisis to take longer resolve itself, if it is allowed to resolve itself at all.[6]

It also goes without saying that the landlords who will buy the homes are more likely to be poorer landlords, as they are by definition landlords who care less about who they rent to. This tends to manifest itself in the appearance and upkeep of the properties, affecting property values throughout the entire neighborhood. Add to that the poor service and quality of work that comes with the government or banks providing the property management and you have the recipe for some scary neighborhoods. Collateral damage certainly isn’t just a military term, once our federal government gets rolling.

So where does this all lead us? I said at the beginning that one of the most disturbing aspects of this story was that an idea like this has been born before the real crisis gets rolling. We have had a market crash and ensuing credit crunch, but everyone seems to be in denial over what inevitably comes next – massive unemployment. Once that starts really manifesting itself (probably as early as next summer), the “state of emergency” mindset will kick in with our government and things could really deteriorate quickly. Right now, loan defaulters are being evicted from the property that they borrowed against and are finding homes in the abundant rental market. However, when the vast majority of them are unemployed, they will need the government to help them, too. It is certainly not hard to imagine a scenario where unemployed loan defaulters are evicted from their homes in foreclosure, only to be “placed” into rental properties that the government owns (but cannot sell), or even into another property that the same bank that just seized their home acquired in foreclosure on somebody else!

For those properties owned by the government, the renters would pay the government directly (eventually it may even be a standard payroll deduction). For those properties owned by a private bank, the Section 8 program will provide the rent subsidies, which the government is now obligated to pay the bank/landlords because they forced them to get into the property management business in the first place. Alternatively, the government may just start buying the houses from the bank, in order to “stablilize” the housing market and because it now has an incentive to grow its new program. The government will certainly have an incentive to put people into the houses that it already owns and cannot sell. This program could realistically feed itself until tens of millions of Americans are in government housing.

On the brighter side, at least this will further solidify the close relationship between our banking institutions and the federal government. We could always use more tight collusion between government and big business. There is no sense in repeating the worst mistakes of the past century without throwing in a little more fascism.

However, the fascist model is more the Republican brand of socialism, at least in this century. The Democrats seems to favor the Marxist variety, as evidenced by their increasingly Marxist rhetoric and their choice of a presidential candidate. Make no mistake, government-provided housing is right in their proverbial wheel house, and you can expect them to jump on the “opportunity” next year’s emergency will afford them to hit this one out of the stadium. The Carter years might look like an economic golden age before this is over. Let’s hope that it is apparent to most Americans in four years that the medicine is killing the patient. Medicare may not be around to cover the catastrophic care needed by 2016.

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[1] Mark, Karl and Engels, Friedrich Manifesto of the Communist Party (The Communist Manifesto) 1848. (This is Plank One of the famous Ten Planks of the Communist Manifesto)
[2] I suppose I should be grateful that the patronizing assertion that “the taxpayers” own Fannie Mae was not made in this particular article. That characterization has been an especially insulting aspect of our conversion to socialism. Ownership can only occur when you CHOOSE to own something, and when you have some control over its disposal. Moreover, it should be evident that even in the unlikely event that our government somehow makes money on this travesty, not one dollar will be coming back to taxpayers, nor should we accept it if it did.
[3] Duhigg, Charles “Fannie Mae Lets Renters Stay Despite Foreclosures” New York Times December 14, 2008
[4] Ibid
[5] Sadly, this expression has become ubiquitous in the private sector as well. Americans brought up under the yoke of coercion know no other way to deal with one another.
[6] Of course, this policy would not by any means be the only factor in houses not selling. Neither will it be the only action government will be taking to block the overall correction and make the depression worse.

>Government’s Old Shell Game

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>Most Americans have seen the hilarious skit on Saturday Night Live, where the CEO’s of the Big Three automakers return to Congress with the “turnaround plan” demanded of them as a condition of receiving (stolen) bailout money. In the skit, the CEO’s drive cars manufactured by their respective companies from Detroit to Washington in order to make amends for flying corporate jets en route to their first appeal for our money. Of course, all three cars break down on the way, making the CEO’s late for their appointment with the (looting) Congressmen. The punch line of the skit is that the only plan that the automakers have come up with is to return to Congress every six weeks to ask for more money. To top it off, the GM CEO promises that by the time that they are ready to accept the December payment – provided that car sales rebound – they would actually need even more money.

It is sometimes said that life imitates art. As funny as the Saturday Night Live skit was, real life proved even funnier. The CEO’s did manage to marshal the resources of their Fortune 500 companies (referencing the 2006 list) and come up with three Detroit-manufactured vehicles that could make it to D.C. However, as in the comedy, the CEO’s show up at Congress three weeks after asking for $25 billion and actually ask for more! Rather than outrage, Americans should really take the opportunity to find some humor in this. As the last vestiges of our Republic are destroyed, one can either laugh or cry. Let’s recognize this ridiculous exercise for what it is – a farce – and have ourselves a good, hearty laugh. We deserve it. Then, let’s stop laughing and turn our attention to the real villains in this immorality play: the United States Congress.

As tempting as it is to focus our attention on the pompous CEO’s of these horribly run companies, let’s not forget why they became so horribly run. It seems to be routinely forgotten that it was Congress that created the labor union problem, with its National Labor Relations Act of 1935 and subsequent violations of property rights. This is why the American auto companies can’t afford to compete. It is also forgotten that Congress created Fannie Mae/Freddie Mac and the Federal Reserve (the three entities entirely responsible for the housing bubble), Medicare and Medicaid (the programs entirely responsible for the both the bubble-prices of healthcare and the lion’s share of our $50 trillion in unfunded entitlement liabilities), the Department of Education (the agency entirely responsible for the next bubble – tuition prices), and every other economic problem that the United States faces. It is no less than tragic that Americans still have not figured out that, left to themselves, with a government limited to enforcing contracts and protecting them against violence, they would trade freely with each other indefinitely to their mutual benefit. Instead, Americans still look to this body of criminals to SOLVE problems that said criminals created. How are they continually fooled?

There are a number of answers to that question, but there is one strategy employed by our ruling class that is particularly frustrating. Students of philosophy may call it the Hegelian Dialectic, while political strategists may call it “framing the debate.” For us plain folks, you might just call it the “heads I win tails you lose” strategy. Every time that Congress wishes to commit some new crime, they present it with a ready-made debate, eagerly facilitated by our so-called journalists. In each case, the issue is presented as if there are only two alternatives, both of which advance government’s purpose to our detriment. Any alternatives beneficial to the people are excluded entirely. It’s the oldest manipulation trick in the book, not much more sophisticated than the old shell game where the pea actually isn’t under any of the shells. Unfortunately, we fall for it hook, line, and sinker, every single time.

This latest farce with the auto companies provides a good example, although there are hundreds (maybe thousands) more. When the idea of stealing our money to give to the failing automakers first came up, there was immediately “fierce debate” in the media about whether the automakers “deserved” the money. Some argued that it was the companies’ own fault that they were in the shape that they were in. Others argued that even if given the money, the automakers would still eventually fail. Congress pompously demanded a turnaround plan from the automakers as a condition of their receiving the money. The media provided (and is still providing) the façade of spirited debate about all of these straw man issues. Every angle to come at this problem is argued, except one: Does Congress have the RIGHT to take our money and give it to somebody else?

Once the deafening silence on this issue is acknowledged, the underlying assumption behind all of the rest of the arguments becomes clear. We no longer have any individual rights. In debating whether or not the bailout money would keep the companies from failing, the obvious assumption is that if the bailout would save the companies, then Congress has the right to forcibly steal our money to save them. In debating whether or not the companies themselves had caused their own demise, you must assume that if they did not, then Congress has the right to steal our money to help them. When demanding that the automakers come up with a turnaround plan to ensure that they do not need taxpayer money again in the future, Congress assumes that they have the right to steal our money as long as the automakers present a reasonable plan.

Not one journalist, not one talk show host, not one panelist – no one anywhere – no matter how liberal, conservative, or even libertarian they claim to be, has made the argument that Congress DOES NOT HAVE THE RIGHT to forcibly take money from one person and give it to another. This argument has been excluded from all debate.

There is a very good reason for this. It is that there is no reasonable argument that can be made on these grounds justifying this theft of our property. The Declaration of Independence tells us that governments are instituted to secure our rights. The Declaration also says that those rights are unalienable, meaning that no government – not even a democratically elected government – can take them away. No majority can vote them away. Foremost among these rights is our unalienable right to the fruits of our labor – our property. THIS was the right that the American Revolution was fought over. Read your history. King George wasn’t denying the colonists free speech, or freedom of the press. The colonists didn’t tar and feather censors. They tarred and feathered TAX COLLECTORS. As I’ve said before, it is your property that tyrants covet, not your right to free speech or freedom of religion. This hasn’t changed in two hundred years, nor will it ever change. Government’s job is to protect our property from theft by other people. There is no circumstance that justifies them committing this crime rather than defending us against it.

Therefore, by stealing our money – for any reason – Congress is contradicting the sole reason for its existence. It doesn’t matter if Congress thinks its actions will save jobs (they won’t), if their actions will save the economy (they won’t), or even if they believe the majority of Americans support their bailout. Even if every American citizen alive save ONE was in favor of giving the auto companies this money, Congress WOULD NOT HAVE A RIGHT to give it. To do so is incompatible with liberty.

Seen in this light, it is obvious why it is imperative that the subject of rights does not come up in any discussion of government bailouts. At all costs, Americans must be distracted away from their rights and lured into arguing about something else. Thus, we argue about CEO bonuses, private jets, energy efficient vehicles (and why Detroit doesn’t make them), and a long list of other unimportant details, while ignoring the one and only issue that matters: that this money is the property of each individual American and that government has no right, under any circumstances, to take it from us. Period.

The automaker bailouts are not unique in this regard. This same parlor trick was played on us with the bailouts of the financial companies. Would the executives keep their golden parachutes? If not, then Congress had the right to steal our money. Would the financial system collapse if Congress did not act? If so, then Congress had the right to steal our money. Would 401K’s and other retirement accounts be decimated without the bailout? If so, then Congress had the right to steal our money (did you notice that they were decimated anyway?).

Over many decades, government has employed this simple subterfuge to bait us into abandoning our impregnable position – our rights – and dupe us into arguing the practical merits (or lack thereof) of their crimes. By taking the bait, we disguise the crimes of our government as ineptitude, and relegate ourselves to complaining about poor results rather than recognizing these usurpations for the crimes that they are.

When the banking bailout was proposed, we objected. For one, brief, shining moment, we were Americans again. We told our representatives that they were NOT to take this money. For one glorious day, our government blinked. Then, they told us that some unimaginable doom awaited us if we did not surrender our property to them. We believed them. They told us that our retirement accounts would be devastated if we did not allow them to violate our rights, so we let them take our money. Our retirement accounts were devastated anyway, and we deserved it. By surrendering our own rights, we violated those of our neighbors. The money we let them take was not theirs OR ours to give.

We have another chance. We can call them again and order them not to give this money to the automakers. Yes, I said ORDER them. Rights are not something that you request of your government. They are something that you DEMAND be respected. Our government is about to once again violate our unalienable right to the fruits of our labor. We must order them not to do so. Do not let them derail you with spurious arguments about what might happen if they don’t steal your money. Stick to your guns and keep bringing the argument back to the only issue that matters: this money belongs to you and they don’t have the right to take it. Make no threats of violence or harassment, but accept no compromise or offer to “agree to disagree” either. Hold their feet to the fire and remind them that this government is YOUR servant. You will be surprised how much power you actually wield.

Check out Tom Mullen’s new book, A Return to Common Sense: Reawakening Liberty in the Inhabitants of America. Right Here!

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>The Misguided Outcry for "Perp Walks"

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>It is bad enough to hear the lie that capitalism caused our economic crisis repeated ad nauseum by both the dishonest and the clueless. It is even worse to hear some of the “solutions” proposed by the incoming presidential administration and other hardcore Keynesians; now that most people are convinced that “laissez faire” is to blame for our troubles (as if the outgoing regime wasn’t as Keynesian as Keynes himself). Worst of all, since the so-called “experts” have been so wrong, even blow-dried talk show hosts feel empowered to render their completely uninformed opinions. None have been more annoying than the latest outcry over the lack of “perp walks” during the sub-prime meltdown and subsequent economic disaster.

The argument, if one could call it that, is that although the government has failed in the past to regulate properly to avoid economic crises, they have at least prosecuted the greedy perpetrators who supposedly caused them. For example, during the accounting scandals of the early 2000’s, Ken Lay, John Rigas, and Bernie Ebbers were just a few of the executives who were prosecuted and sentenced to particularly harsh jail terms for their roles in the demises of their respective companies. The SEC even took the bizarre step of prosecuting Arthur Anderson – not its executives, but the corporation itself – proving that even imaginary entities were not beyond the long, destructive arm of the federal government. Supposedly, these headline-making witch hunts “send a message” to the rest of the high finance class that it’s time to clean up its act. It also seems to make financial talk show hosts (who seem to learn nothing about economics no matter how long they remain on their jobs) feel much better about things, no matter how little these prosecutions have to do with the economic problems said hosts pretend to report on. Of course, ratings never suffer when the wealthy are marched off to the prisoner’s dock.

During this crisis, however, there have been no such prosecutions for the “fraud” everyone keeps talking about as if it actually played a major role in the mortgage meltdown. Don’t get me wrong, I’m sure that there was fraud committed, and the perpetrators should be prosecuted. However, both the media and most of the public continue to demonstrate their complete lack of a sense of proportion when they point to fraud related to tens or even hundreds of millions of dollars while we are experiencing a crisis involving TRILLIONS of dollars. We can burn all of the witches we want, but it won’t get us any closer to solving this crisis. As our socialism bubble continues to deflate, we must confront the systemic problems that caused it or they will finish devouring what is left of our once powerful economy.

It is a little too easy to simply dismiss the lack of prosecutions as the Bush administration refusing to go after its friends during their waning days in office. No matter how friendly they may have been to Wall Street (at our expense) over the past eight years, they have not hesitated to turn on their friends at the first sign of trouble, as the above-mentioned prosecutions demonstrate. Ken Lay in particular seemed to be a close personal friend of President Bush, but when the heat came, Mr. Lay found that door firmly closed. No, close ties to Wall Street are not the reason for the lack of prosecutions for fraud in this crisis.

As I’ve said before, this latest crisis was not caused by fraud or even greed, it was caused by theft. To understand this, one must acknowledge all of the parties in the transactions in question. Whether it is out of ignorance or by design, our politicians and media[1] consistently fail to acknowledge one of the parties. It is hard to give them the benefit of the doubt, because this omission is crucial to promoting their great lie, the failure of free markets.

For example, when talking about sub-prime loans, the only parties acknowledged are the borrower and the lender. Supposedly, the “predatory lenders” misled the borrowers about the terms of the loans, duping them into taking more risk than they should have. At the same time, many borrowers were irresponsible or even dishonest in taking on more debt than they could afford. Even those lenders that did not perpetrate some kind of crime in misleading the borrowers were at least grossly irresponsible because of their “lax lending standards.” So, the case is made that these two parties, acting freely as economic agents in a supposedly laissez faire environment, made bad decisions causing enormous losses that could have been prevented with more regulation. Thus, it is more regulation that is needed to prevent a similar catastrophe from occurring again.

The obvious question that one would ask is why anyone needs to be protected from the consequences of their own actions. If the lenders or borrowers take too much risk, they may lose their money. However, it is their money to lose, and if they lose it, what harm could this do to anyone else?

The answer lies in the true nature of the transactions in question. The argument above assumes there were two parties to each loan, when in fact there were three. However, unlike the borrower and the lender, the third party – the taxpayer – WAS NOT acting freely. The third party was forced to put up his or her money as collateral, without which not one sub-prime loan would have occurred. Moreover, the mortgage-backed securities that are playing such a pervasive role in the collapse of the financial system also would not have been sold had the purchasers not been assured that the government was backing the loans. This was nothing resembling a failure of free markets. It was an easily predictable consequence of government distorting the financial system and the economy by intervention into the markets. As is always ultimately the case, its intervention boils down to armed theft of property. Regardless of the fraud that may have been committed by lenders or borrowers, it was this crime by government that is responsible for the crisis.

Obviously, this is the reason that we haven’t seen “perp walks.” It is unlikely that our federal government is ever going to indict itself for any of its crimes, no matter who is president or what party has a majority in Congress. As for the private sector, the truth of the matter is that most of the conduct by the lenders actually amounted to them doing exactly what the government told them to do. They relaxed their lending standards because government pressured them to give loans to people that they wouldn’t have otherwise lent to, using money stolen from us to remove the onerous risk. Had the lenders been more responsible, they faced charges of discrimination against minorities or other disingenuous “fairness policies” designed to help our government achieve its age-old socialist dream of forced equality. In fact, as I’ve said before here, even the executives at Fannie Mae began to come forward and express concern about the risk that the GSE’s were taking on. What was the answer from our government? The GSE’s were told that they weren’t doing enough; they should be “helping” more people. Government stole money from us to cover bets that even their own people were telling them were losers.

Therefore, if there are going to be any perp walks, it should be members of the federal government themselves that should be doing the walking. While we are making arrests, let’s not let the guilty from past presidential administrations escape justice. As I’ve previously argued, it was really the Clinton administration that sowed the seeds of this crisis. It was Clinton that raised the GSE’s to such prominence and pushed through legislation making it a crime to deny a mortgage. Even using the government’s faulty reasoning[2] that a lack of regulation is to blame, it was Clinton that signed the bill repealing the Glass Steagall Act and paving the way for the government-enabled speculation that followed.

Ironically, as bad as the Bush administration has been in so many other ways, it was actually their failure to reverse these Clinton policies that represents their most significant contribution to the mortgage crisis. Most importantly, neither Clinton, nor Bush, nor the majority of the members of Congress can deny their guilt in the central crime that has been perpetrated. They all had a hand in government theft of property. For these perp walks, the federal marshals won’t have to fly to Chicago or New York to make the arrests. They need only walk down the street.

[1] I still observe the quaint practice of referring to them as if they were separate entities.
[2] The Glass Steagall Act is another of those FDR regulatory schemes that is only perceived as necessary because of risks that ultimately exist because of government’s improper involvement in the economy.

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The Bill Clinton Myth Finally Debunked

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clintonWhether you are watching the stock market, the headlines, or merely your 401K account balance, there is not much positive about the economic collapse just getting underway in the United States. With each new negative earnings report, bankruptcy, and ominous unemployment report, it gets a little harder to see any silver lining around the black cloud. However, there is one positive consequence of the economic debacle: The Bill Clinton Myth has finally been debunked.

Most people are familiar with the Myth, but mistake it for history. It’s a wonderful story if you are a Democrat or other variety of government-worshipper. For those who practice that religion, the Bill Clinton years serve as a Golden Age to talk about, write about, maybe even pray about, hoping for their return.

Unforunately, this myth does not even offer the benefits of its more interesting ancient predecessors. While the ancient myths of gods and monsters contained spiritual and philosophical truth underneath their obviously fictional storylines, the Bill Clinton Myth contains no truth at all. Perhaps “myth” is the wrong word, because it gives good myths a bad name.

The Bill Clinton Myth goes something like this. After “mismanagement” of the economy by President George H.W. Bush, which resulted in the recession that coincided with the 1992 election, Clinton took office and “managed the economy” wisely during his eight year presidency. Clinton’s “centrist policies” were just what the economy needed at a time of technological revolution, and his wise stewardship resulted in not only unprecedented growth and low unemployment for the economy, but balanced budgets and even surpluses for the federal government. By the time Clinton left office, the United States was more powerful economically than it had been at any time in its history.

Like the Populist Myth of the 19th Century, this one is a great story, but none of it is true. While even some Republicans begrudgingly credit Clinton with the mythical budget surpluses or the equally mythical prosperity in the 1990’s, they do themselves a disservice in regard to their quest to discredit every Democrat who ever (or will ever) lived.

In reality, there were no federal government surpluses. The lion’s share of the prosperity was a Federal Reserve-created bubble (the dot com bubble) and what real economic growth there was occurred despite Clinton’s policies, not because of them.

It might be necessary to go back and read that last sentence again. It is heresy, as surely as Galileo’s heliocentrism was to the Inquisition. It’s also just as true.

First, the so-called “surpluses” were bogus. As Craig Steiner explains, the appearance of a surplus was merely increased tax revenues from the dot com bubble allowing the Clinton administration to borrow more money from Social Security. While the public debt went down in the last four years of the Clinton presidency, the intergovernmental debt (mostly to Social Security) went up by an even greater amount, resulting in an increase in the national debt in each of those years. These are easily verifiable facts out of the published federal government budgets for those years. Anyone who doubts this can simply look up the budgets from 1997- 2001 and see the deficits for themselves.

Certainly, there were astounding developments in technology in the late 1980’s and throughout the 1990’s. One could look at this decade as a mild version of the technological revolution that occurred at the turn of the 20th century, although the breakthroughs, mostly in computing, were not as paradigm-shifting as the invention of the steam engine or the automobile, much less the telephone or the computer itself. These advances resulted in vast increases in productivity. A whole industry  was born, employing people in higher paying jobs and revolutionizing communication, commerce, and production.

All of this happened during Bill Clinton’s presidency, although its roots go back at least as far as the Reagan years, possibly even Carter. But what did Bill Clinton do to cause this technological revolution? Nothing. Microsoft, Oracle, Apple, and the rest of the real new companies that emerged during this technological revolution were children of the free market. Gates, Ellison, Jobs and the rest were all entrepreneurs who took enormous risks based on their superior vision of where breakthroughs in technology could take commerce.

Anyone old enough to remember knows the government had very little understanding of the tech sector and frequently complained it didn’t know how to regulate the new types of products or business processes the tech sector presented. In other words, much of the reason for the explosive growth was the absence of government involvement. Until the lumbering machinations of government caught up, a free market in technology existed that allowed for spectacular innovation and growth.

The most significant action undertaken by the Clinton administration regarding the tech revolution was its anti-trust case against Microsoft. Here, Clinton’s contempt for free markets and property rights came shining through. This particular anti-trust case had a bizarre twist, as it was based upon the ludicrous assertion that Microsoft had some responsibility to build opportunity for its competitors into its own product. As usual, the government tried to “ensure competition” by using its coercive power to cripple the leader, rather than protect the property rights of all.

There was another side to the tech revolution that wasn’t the natural result of free markets: the dot com bubble. This was Pets.com, online supermarkets, and other hare-brained schemes that only got capitalized due to the reckless monetary policy pursued by the bubble-maestro himself, Alan Greenspan.

To be fair, Clinton doesn’t deserve much blame for this bubble. Most politicians demonstrate little understanding of monetary policy, beyond their belief that lower interest rates raises stock prices and higher stock prices equals votes. At one point, Clinton actually made a speech in which he claimed the business cycle had been eliminated.[1] That shows his understanding was as limited as most other presidents’.

Regardless, the dot com bubble had nothing to do with Clinton. It was merely the Fed doing what the Fed does, inflate and distort the economy, regardless of who happens to occupy the White House.

Finally, in addition to the false credit Clinton receives for his imaginary role in the perceived prosperity of the 1990’s, he has somehow escaped all blame for his very real hand in the problems we are facing now. Remember, it was Clinton who appointed FDR II (Franklin Delano Raines) as CEO of Fannie Mae, and then pressured the GSE to significantly increase its loans to riskier sub-prime borrowers.

The Clinton administration bragged it had not only had a hand in the first black CEO of a Fortune 500 company,[2] but also that it had made home ownership possible for millions of Americans that otherwise could not have obtained mortgages. Raines is now the subject of over 100 civil lawsuits and a huge percentage of those mortgages are defaulting. As usual, the government’s results when interfering in markets are exactly the opposite of its intentions.

Contrary to the Clinton Myth, the Clinton presidency had nothing to do with what real prosperity there was in the 1990’s. The Clinton administration was as clueless and impotent as most others while the Federal Reserve blew up an enormous bubble on its watch, sowing the seeds for the mortgage crisis that started the present economic disaster. Economically, the Clinton presidency was an unmitigated disaster, and hopefully it is clear to all but the most fervent believers that his “stewardship of the economy” is a myth.

Lest this be seen as partisan, let me clear the air. There have been two presidents credited with prosperity that seemed to coincide with their years in office during the past 40 years. One was Reagan, a Republican, and the other, Clinton, a Democrat. In both cases, they were falsely credited with prosperity that was mostly an illusion caused by the Federal Reserve. Their policies otherwise failed miserably.[3]

With the Clinton Myth exposed as a fraud, perhaps we can get rid of the entire government religion. Centuries ago, most people of the earth ceased sacrificing animals to bring rain, better crops, or good fortune hunting. They had finally realized there is no cause-effect relationship between killing a goat and the end of a drought. We need to likewise recognize that no politician has ever had any more to do with prosperity than those unfortunate goats had to do with the weather.[4] Freed from this superstition, it becomes clear that only free markets, individual effort, and creativity can create wealth and prosperity.

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

 

[1] I recall him making this ludicrous statement, but have not been able to reference it. Perhaps someone can provide the citation in a comment.
[2] The focus by both the Clinton administration and the media on Raines, a political hack who took over a Government Sponsored Entity, was a disservice in that it distracted attention from REAL black executives, like Kenneth Chenault, and Richard Nanula, who had risen to their positions based upon their talent and hard work.
[3] To be fair, Reagan’s rhetoric was admirable. He talked constantly about lower taxes, smaller government, and more personal liberty. However, he failed to implement this ideology to any significant degree, possibly because of a Democratic Congress. More importantly, he ran huge deficits due to defense spending and the growth of entitlement programs on his watch that constituted bigger government rather than smaller.
[4] Actually, the government religion is far more harmful than the ancient religious cults. When the ancients sacrificed a goat, they neither benefitted nor harmed anyone (other than the goat). When government tries to “create prosperity,” it harms everyone in society.

 

>Obama and the Ghost of FDR

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>President-elect Barack Obama has not even taken office yet, and already the entire world seems to be celebrating the death of the last vestiges of capitalism. With the Democrats in control of both the executive and legislative branches of government, calls for a “new New Deal” are as commonplace today as the expression “it’s a free country” once was (you don’t seem to hear that much anymore. I wonder why?). It is not as if the “Change” Obama proposes to bring will be that radical. The United States has not practiced free market capitalism since at least before the last Great Depression, despite the ludicrous claims that capitalism is to blame for the next one. However, Obama will have to come up with something original if he is to leave an imprint upon history comparable to that of the original New Dealer. Not only did FDR turn the Hoover-created depression into the ten-year Great Depression, he has now actually reached from beyond the grave to take down the world’s largest automaker. Even apocryphal stories of the holy Obama walking on water pale in comparison to that.

It is nothing less than astounding that GM can fail so spectacularly as a direct consequence of the policies of the first FDR, while the entire world not only ignores the fact that the New Deal caused it, but actually demands another New Deal as the solution. Not even O. Henry gave us irony like this.

There is actually very little debate about what has caused the destruction of the American auto industry. Occasionally, a weak attempt is made to imply that the Big Three should not have concentrated on trucks and SUV’s while foreign competitors were making more energy-efficient vehicles. However, it is very easily demonstrated that the U.S. automakers had no choice but to concentrate on vehicles that had the necessary margins to cover their huge labor costs, both for current and retired workers. Decades of concessions to powerful labor unions have driven their costs so high that they are simply unable to make an automobile that competes with foreign imports.

There are those that argue that “unregulated capitalism” caused American manufacturing jobs to migrate overseas, where manufacturing labor was cheaper. However, this fallacy refutes itself. If “market forces” truly were in play, how did U.S. labor costs get so high? Did “greedy capitalists” simply abandon their profit ambitions and decide to pay their employees more than they could afford to? Surely, this would have required not merely irresponsibility but utter foolishness from the same crowd that MADE GM the largest automaker in the world. What caused this decades-long failure of basic business sense?

Of course, everyone knows the answers to these questions, but want to pretend that they don’t. The reason that manufacturers, especially the automakers, continually promised labor unions more than they could afford to pay was because government FORCED them to do so. It really is that simple. Under the euphemism “collective bargaining,” the government made it illegal for a manufacturer to refuse a demand from a union. An illusion of choice was sustained by merely requiring the employer to “make a reasonable counter-offer,” but the courts were there to see that “reasonable” meant that if the union asked for the moon and the stars, the employer would have to at least agree to a few planets. In the end, the employer could not choose freely as far as what to pay their employees or what benefits to offer. Without free choices, market forces are suspended.

To make this as plain as it can possibly made, this game is played like this: The union demands compensation beyond what the business model will support. The employer replies that they are unable to agree if they wish to stay in business. The government says, “Just give it to them or we’ll shoot.” Another “victory for the workers,” is won and the inevitable end draws nearer.

The entire union concession/cost escalation dynamic goes back to the National Labor Relations Act of 1935 and other New Deal legislation. It was these fundamental departures from capitalism that sowed the seeds of the eventual destruction of American manufacturing. What is honestly horrifying is that Americans can observe this government coercion of industry and seriously refer to it as “unregulated capitalism,” or to the series of concessions made by manufacturers at gunpoint as “market forces.” We are truly through the looking glass where a bull is stumbling through the china shop and the storekeeper is reprimanding the broken glass.

While it might seem unfair to blame a man that has been dead for over six decades for the failure of a company in 2008, one must consider the dominance that America enjoyed in the manufacturing sector to begin with. At one time, American manufacturers flooded the world with high-quality, low-cost goods, while still paying wages many times higher than their competitors overseas. There was no sector where America was more dominant than automobile manufacturing, an industry that America literally invented. It would not be brought to bankruptcy overnight. Year after year, decade after decade, the companies grew a little less profitable as government forced them to raise their labor costs IN OPPOSITION to market forces. It was not until decades later that those costs rose beyond the point where the companies could remain competitive.

However, the length of time it took for the disease to run its course does not change the nature of the virus that caused it. Indeed, the same reasoning could be applied not only to the entire manufacturing sector, but to other sectors of the American economy as well. The collapse we are experiencing is the result of an entire economy that has been rendered profoundly unproductive by systemic problems that all relate to government intervention into markets. We have still not found a cure for cancer or the New Deal. To be fair, the poisons we use to try to kill cancer before the they kill the patient are far less deadly and have a much higher rate of success than the medicine we are about to apply to our current economic crisis. The survival rates for many cancers continually improve. The survival rate for American businesses might not be significant enough to measure.

So, Obama will have to be creative to achieve staying power comparable to FDR’s. While Obama’s stated economic policies are terribly destructive, there is not much left of the American productive structure to destroy. More than likely, his interventionist and redistributive policies will merely apply the coup de grace to an economy that at this point merely retains the superficial façade of its former capitalist glory. In order to truly emerge from the shadow of the Ghost of FDR, Obama will have to find a completely new, original way to rend the fabric of our once-free society. One can only dread what that might be.

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