After lowering the interest rate to zero and pumping trillions into the market, the Fed is finding that it has no tools to address the inevitable bursting of the bubble. They may try to blame the economic tsunami on coronavirus, but this crash has been in the works for some time. Mises Institute President Jeff Deist joins today's Liberty Report.
By Ron Paul
Governments love crises because when the people are fearful they are more willing to give up freedoms for promises that the government will take care of them. After 9/11, for example, Americans accepted the near-total destruction of their civil liberties in the PATRIOT Act’s hollow promises of security. It is ironic to see the same Democrats who tried to impeach President Trump last month for abuse of power demanding that the Administration grab more power and authority in the name of fighting a virus that thus far has killed less than 100 Americans. Declaring a pandemic emergency on Friday, President Trump now claims the power to quarantine individuals suspected of being infected by the virus and, as Politico writes, “stop and seize any plane, train or automobile to stymie the spread of contagious disease.” He can even call out the military to cordon off a US city or state. State and local authoritarians love panic as well. The mayor of Champaign, Illinois, signed an executive order declaring the power to ban the sale of guns and alcohol and cut off gas, water, or electricity to any citizen. The governor of Ohio just essentially closed his entire state. The chief fearmonger of the Trump Administration is without a doubt Anthony Fauci, head of the National Institute of Allergy and Infectious Diseases at the National Institutes of Health. Fauci is all over the media, serving up outright falsehoods to stir up even more panic. He testified to Congress that the death rate for the coronavirus is ten times that of the seasonal flu, a claim without any scientific basis. On Face the Nation, Fauci did his best to further damage an already tanking economy by stating, “Right now, personally, myself, I wouldn’t go to a restaurant.” He has pushed for closing the entire country down for 14 days. Over what? A virus that has thus far killed just over 5,000 worldwide and less than 100 in the United States? By contrast, tuberculosis, an old disease not much discussed these days, killed nearly 1.6 million people in 2017. Where’s the panic over this? If anything, what people like Fauci and the other fearmongers are demanding will likely make the disease worse. The martial law they dream about will leave people hunkered down inside their homes instead of going outdoors or to the beach where the sunshine and fresh air would help boost immunity. The panic produced by these fearmongers is likely helping spread the disease, as massive crowds rush into Walmart and Costco for that last roll of toilet paper. The madness over the coronavirus is not limited to politicians and the medical community. The head of the neoconservative Atlantic Council wrote an editorial this week urging NATO to pass an Article 5 declaration of war against the COVID-19 virus! Are they going to send in tanks and drones to wipe out these microscopic enemies? People should ask themselves whether this coronavirus “pandemic” could be a big hoax, with the actual danger of the disease massively exaggerated by those who seek to profit – financially or politically – from the ensuing panic. That is not to say the disease is harmless. Without question people will die from coronavirus. Those in vulnerable categories should take precautions to limit their risk of exposure. But we have seen this movie before. Government over-hypes a threat as an excuse to grab more of our freedoms. When the “threat” is over, however, they never give us our freedoms back.
As the Fed fires money bazookas at the markets to no avail, governors across the US are shutting down businesses and destroying livelihoods. This is government out of control - it is many times more dangerous than any coronavirus.
The Fed created the biggest financial bubble to ever exist. Every bubble is followed by a bust, so the Federal Reserve, regardless of any other event that occurs, is responsible for creating economic crisis. The real solution is to put an end to The Fed and monopolistic central banking. But until that conclusion is finally reached, the proposed solutions from every corner will be for The Fed to counterfeit currency in larger and larger doses. This assures continuous economic crises of increasing severity.
As the House further debates a resolution restricting President Trump's power to make war on Iran, the House is rushing through a "coronavirus stimulus" bill pumping more billions into the pockets of the well-connected. Meanwhile, President Trump has announced that no flights from Europe can land in the US. How is that going to work? And where's the authority?
By Ron Paul
[Editor's Note: Back in January of 2018, Ron Paul delivered a Special Report detailing the tremendous financial trouble that The Federal Reserve had set in motion. This trouble would someday manifest in a serious financial crisis; one even larger than the previous Fed-created crisis of 2008. You can re-read the transcript of that speech below, or watch Dr. Paul deliver it on YouTube here.]
The Great Recession began in 2007. It didn’t take long for the money managers to recognize its severity, and that a little tinkering with interest rates would not suffice in dealing with the economic downturn. In Dec. 2008, the first of four Quantitative Easing programs began which did not end until Dec. 18, 2013. Some very serious consequences of this policy of unprecedented credit creation have set the stage for a major monetary reform of the fiat dollar system. The dollar’s status as the reserve currency of the world will continue to be undermined. This is not a minor matter. As our financial system unravels, the seriousness of it will become evident to all, as the need to pay for our extravagance becomes obvious. This will make the country much poorer, though the elite class that manages such affairs will suffer the least.
By the time the QE’s ended, the Central banks of the world had increased their balance sheet by $8.3 trillion, with only $2.1 trillion worth of GDP growth to show for it. This left $6.2 trillion of excess liquidity in the banking system that did not go where the economic planners had hoped. Central banks now own $9.7 trillion of negative interest yielding bonds. The financial system has been left with a bubble mania, financed by artificial credit and unsustainable debt. The national debt in 2007 was $8.9 trillion; today it’s $20.5 trillion. Rising interest rates will come and that will be deadly for the economy and the Federal budget. This inflationary policy is generated by the belief that there is no benefit in allowing the needed economic correction to the problems generated by the Fed to occur. The correction is what the market requires, not the resumption and acceleration of the dangerous inflationary policy that caused the bubble economy. It’s like giving a case of beer to an alcoholic to calm his nerves as he attempts to stop drinking. It should not surprise anyone that perpetuating a problem won’t solve the problem. The obsession with a QE monetary policy has created a bubble economy of enormous size which one day will burst. The warning signs are everywhere, yet ignored. Political demands control policy; not common sense or sound economics. All major decisions are bipartisan and guarantee a continuation of current spending, taxing, inflationism, welfarism, and warfarism until the giant bubble bursts. All recessions since the Great Depression were essentially caused by the Fed’s mismanagement of monetary policy and subsequently resolved by it with renewed vigor in monetary mischief by rigging interest rates and the money supply. This off and on process temporarily aided the economy, but structural defects multiplied. Debt accumulation, mal-investments, unfunded liabilities, welfare benefits, militarism, constant wars, uncontrolled government growth, and systematic attacks on our liberties, have continued unabated. The people sense that a major crisis is fast approaching. Today’s Super Bubble economy, promulgated by the QE’s, must resolve itself. A continued program of spending and inflation, while financing even bigger government, will only exacerbate the social chaos that has already started. That is to be expected in a bankrupt nation. And the US is bankrupt! Eventually our dollar and credit will weaken, prohibiting us from living off others or our future generations. Social conflict will add to the financial difficulties caused by the QE dangerous experiment. Trillions of new dollars created in the last decade is unprecedented and the full consequence of this policy is yet to be discounted. My concern is that it will be much more serious than most expect and few will be prepared to offer a solution -- other than to demand more government even if it’s at the expense of liberty, peace, and prosperity. Prosperity, built on debt, inflation, and false government promises, is illusionary and can disappear quickly. It will be necessary that the people learn, or relearn, that debt is not wealth, paper is not money, free stuff is not justice, war is not peace, and government coercion is not liberty. Signs of social chaos are readily apparent and are a predictable consequence of the economic distortions created by the excesses of the QE bubble. Inequitable wealth distribution becomes a problem in an economy regulated by Federal Reserve mismanagement. The wealthy do get wealthier and the poor do get poorer when a currency is debased, with the middle class suffering the most. The ability of the special interests to influence legislation to benefit from the distribution of newly created money, is legendary. Think: “military industrial complex,” “free welfare benefits,” “bank bailouts,” and early access to an inflated currency. All these items play a significant role in the accelerating disparity of wealth distribution between the top 10 percent and rest of the people. These problems will worsen and fuel social conflicts and anger. The inequity, not being fully understood, causes those who feel cheated to become angry and to start thinking about the false promises of the Socialists. This, along with the large number of economic Marxists who have inundated our government-run colleges, presents a problem that feeds into the anger. It doesn’t take a lot of searching to witness the anger in action on the campuses, as expressed by both students and faculties. This conflict encourages envy and greed to flourish and justified with a sense of moral indignation. The greater the chaos, the easier it is for the Marxists to join in the fray and promote hate and destruction of cultural and traditional norms. It’s essential that the economic distortions, that arrived with the QE’s, as part of Keynesian economic planning, will need corrected to restore long- term economic growth. The full cost of decades of deficit spending must be paid for one way or another. The problem of economic ignorance and misplaced good intentions will need to be addressed in order to steer a course that rejects the notion that unlimited government spending can be financed by the dangerous QE type of monetary inflation. This, sadly, will not be considered until the super bubble bursts and it becomes evident that the correction that has been avoided so far has become a necessity. It is my opinion that the QE bubble is bigger than the Housing Bubble and the Dot Com Bubble combined. It is no easy task to correct for all the mal-investments and excessive debt and provide for all the unfunded liabilities. In the process of paying the piper, the country is destined to become much poorer, especially since a miraculous increase in productivity is unlikely in spite of the hoped-for benefits from the recently passed tax law. Economic, psychological and political pressure will prevent the changes in policy needed to deal with the huge complicated mess that the QE’s have generated. What we are experiencing is the climactic end of gigantic experiment with a fiat currency inflation, the size of which was never tried before. The Fed has followed a deliberate policy of monetary debasement from the time it was sanctioned in 1913. Though there was a steady erosion of the dollar’s value throughout the 20th Century, a link to gold was maintained until the closing of the gold window by Nixon in 1971. A total fiat currency - the dollar - was unleashed on the world with this event, and the US became the biggest beneficiary by assuming the role of managing the world reserve currency. For decades this well served America’s interests since it was equivalent to the world permitting us to create as much “gold” as we wanted. The system was totally fraudulent since it was imaginary money and we owned the printing press. Why should anyone be surprised at the results of what excessive money creation has caused? Printing fiat currency and expanding the money supply has nothing to do with creating wealth. This process is more likely to destroy wealth than create it. The QE programs have undermined sound economic policy and will continue to do so as the consequences of the massive monetary expansion become more evident with the bursting of the bubble economy. Instead of allowing the correction to run its course, the economic planners continue to pursue the goal of invigorating a failed experiment. Keynesianism created the monster crisis that we’re facing and yet the platitudes pushed by both political parties fail to address the subject of huge deficits and massive spending. This process can’t be stopped as long as the politicians and the special interests persistently and strongly oppose restricting the current role of our government. A compliant citizenry that fails to grasp the importance of liberty and instead accepts dependency on government as a substitute for self-reliance, guarantees that the bursting of the QE Bubble will generate a much more serious crisis than it need be. What’s involved in the bubble? Plenty! Almost everything to some degree. It is difficult for an economy to operate smoothly without a sound currency to measure value when goods and services are transferred from one entity to another. A definable medium of exchange is crucial to facilitate the market. Ever since direct bartering was phased-out more than three thousand years ago, the choice of the marketplace for money has been something tangible. As the understanding of the nature of money developed, the items used for money were easily recognizable, devisable, long lasting, and definable. Early on, governments challenged the market choices, especially when gold and silver were chosen, and replaced them with a government monopoly control over the currency. The contest between the market’s desire for honest money and the government’s desire to solidify power by usurping the authority to debase the currency started early on and continues to this day. Government’s monopoly over the creation of money is equivalent to counterfeiting and resulted from the fact that the people never liked to pay taxes for unnecessary wars and to provide benefits to the politicians and their friends. Though beneficial to the powerful few, the abuse and the inequitable distribution of wealth that resulted would inexorably stir anger and rebellion within the people, who demanded changes to the system. It is true that nothing ever changes under the sun or with human nature. We today are approaching a political and economic crisis of enormous proportion as a consequence of this age-old phenomenon of abuse from a government financed by a modern-day monetary destruction of the economy with the QE’s dangerous experiment. It is more than a minor correction that is needed to deal with the huge excesses that today exists world-wide. Many of the central planners in charge reassure us that the concern for a dangerous bubble existing is completely unfounded since the CPI is barely rising. Two points: 1) The CPI is rising faster than they will admit and 2) The CPI is not the tell-tale sign of a serious bubble forming. Many other bubbles and dislocations can exist as a consequence of creating trillions of dollars out of thin air. And there are quite a few: The housing bubble is back along with subprime loans. There’s an auto financing bubble encouraged by subprime loans for many customers. The stock market is in a bubble waiting to be pricked. The bond market is in a huge bubble as a result low or negative interest rates. Wall Street has inflated expectations that America is quickly being “Made great again.” Exaggerated trust exists in the dollar maintaining its reserve status for the foreseeable future. The unwinding of the Fed’s balance sheet and a move toward market rates of interest is a long way off. Deficit financing for the Military Industrial Complex will not be challenged before the QE bubble bursts. Saving for a rainy day or to make a future purchase is not considered sound policy. Unlimited borrowing is. Credit card debt is in a bubble. Student loan debt is in a bubble. Transfer payments to the dependent poor will never be cut. Instead, when the big bubble bursts these payments will skyrocket since the process will generate more poor. The medical care spending bubble has created a huge mess with misallocation of resources, runaway cost, and poor care. Corporate medicine must end and be replaced by a free market. Cultural Marxism’s influence on American college campuses is a dangerous “bubble.” The dollar is in a bubble. The unpayable pension systems: federal, state, county, city, involves trillions of dollars. The unpayable debt bubble can only be held together by accelerating inflation and the liquidation of debt by currency debasement. This is a very dangerous economic and political solution that seems inevitable. The problem describes what happens to a bankrupt country refusing to live within its means. Instead of being reassured that things are going well because Wall Street is booming, it should be a warning sign that danger lies ahead and reveals the growing imbalance between rich and poor. The bubble mentality of neocon war-mongering needs to end. The sooner the better. Sadly, it will only end after the dollar-driven bubble economy collapses. The foreign policy of militant interventionism needs to be extinguished. It’s a major source of debt and lost credibility for us, both of which undermines dollar hegemony. The bursting of the dollar bubble will not be a minor event. The adjustments required to restore economic prosperity and preserve liberty will be a major challenge to all freedom loving Americans. The excesses of an economy based on debt, inflation, central planning, constant war, the military industrial complex, and crony capitalism, all contribute to a growing disparity of wealth between rich and poor. This type of command system is self-limited but eventually always fails. Though it takes a lot to kill a once robust economy, our political leaders have managed to set the stage for a major crisis, brought on by QE’s attempt to rescue it from the coming bankruptcy. The problems we face today did not appear overnight. It took many decades to create the conditions of bankruptcy and the beginning of the end for the dollar as the world’s reserve currency. There have been many warning signs, dating all the way back to the origination of the Federal Reserve in 1913, and with the subsequent growth of central banking world-wide. The Bretton Woods Agreement in 1944 established the dollar as the reserve currency of the world with a watered-down version of the gold standard, and was destined to fail as it did in 1971. Noted free market economist, Henry Hazlitt, at the time of its inception, predicted that it would fail due to inflationary policies that the Fed would not be able to resist. Throughout the 20th Century, the Fed created many recessions and depressions that were papered over with accelerating inflation and government deficit spending. It worked to some degree on the short run, but postponed the required payment for another day. Unfortunately that day has arrived, and the flawed policy of delaying the payment needed to keep the economy churning, is no longer working. The replacement of the Bretton Woods arrangement with the fiat dollar standard in 1971 continued to benefit the US by it maintaining control over the world reserve currency. This arrangement permitted us to “export” our inflated dollars and buy cheap imported goods from overseas. This led to a structural imbalance in foreign trade with a hefty short-term benefit to us at the expense of a huge foreign debt. When the magnitude of this problem hit in 2007, the QE program of massive credit creation was initiated, which only compounded the problems already generated by zero and negative interest rates, along with astronomical budgetary deficits. More drugs for the addicted never solves their problem. The search is now on for a solution to our financial time bomb, a foreign policy presenting great danger to the world, and the systematic attack on our liberties here at home. We’re beyond the point where more lies and deception will calm the anger. The wealth available for bribing the masses is quickly dwindling as the demands and expectations grow. The dollar is destined to go down in value, as it has been doing since 1971. We are getting weaker and poorer and other world governments are getting stronger and richer. The dollar this past year lost more than 10 percent. There’s a lot of built-up resentment toward America for the privileged financial position that it has enjoyed for decades, while it flaunted its “exceptionalism,” backed by a militant foreign policy. This arrangement is ending and the process will not go smoothly. Though the consequences of QE are all around us, there’s little else the planners will consider. A repeat of this failed effort will be tried again-with worse results. Cutting spending, reining in the Fed, and strictly limiting the role of government, can only be achieved in the distant future after the current crony-capitalism and welfare state self-destructs. Preparing for that day is the job for all who desire to live in a free society. If current authoritarian policies are left unchecked, our economic conditions will deteriorate and true freedom will only be a memory. There’s a growing number of people becoming aware of the significance of the Fed’s disastrous monetary policy and the utter silliness of QE. Since few people expect the privileged class to promote sound money, many outside of government are seeking a system of money that protects wealth rather than destroys it. Historically, money originated in the marketplace as a tangible asset. The choice for thousands of years has been the precious metals, especially gold. Governments, notoriously, have taken over monopoly control of the monetary systems and used them to benefit the government over the people. Because of the abuse of the currency over the centuries, a return to gold was frequently needed to restore order and confidence in the money. For this reason, I have been a champion of competing currencies to allow the people to make the choice about the monetary unit, as long as no fraud was involved. A government-designed currency should also be free of fraud. This means no fiat currency and no legal tender laws. A tangible currency developed in the market, such as gold or silver, should not be subject to sales or capital gains taxes. The race is now on to find an alternative to our current dollar system in order to escape from the Federal Reserve run banking system. Crypto-currencies have been offered as an alternative with much vigor. By Jan. 3, 2018 their total capitalization was more than $700 billion with 97 percent of that achieved in less than a year. It has been declared a “mania” by many. This type of price appreciation would not have occurred without the funds the QE’s generated by the Federal Reserve. The money managers have been in a quandary for the past 10 years because the inflated money supply and the very low interest rates did not generate the economic growth they wished for. Now it’s going into numerous bubbles like stocks, bonds, housing, student debt, and crypto-currencies. My view is that the entire economy is a huge bubble with sovereign debt being the most dangerous. Though currently, there is a lackadaisical interest in gold compared to crypto-currencies, I believe gold is in the early stage of the third major bull market since 1971, which started two years ago when gold was $1050/oz. If history is of any benefit, gold will be used in the coming monetary reform, whether it’s accomplished by the government or the market. But if the choice of a monetary unit turns out not related to something tangible, it will prove to be a first in history. Just because our current money is now a total fiat dollar, it can’t be used to justify a market developed fiat currency. We must remember that the dollar was originally defined as a weight of silver or gold. The destructive nature of the monetary event of Aug. 15, 1971 was a consequence of our government refusing to maintain the dollar’s relationship to something tangible, thus making it a fiat currency. This explains why we’re in such a mess. A fiat currency developed in the market, won’t solve the current financial crisis the world faces. A sound currency must have a fixed definition of a tangible item. Its value must be determined by free market pricing in exchange for goods and services. Bi-metallism, by fixing an ounce of gold to a certain number of ounces of silver was unworkable. Fixing the definition of the monetary unit is similar to fixing the exact length of a “yard or meter.” The “yard” can be used to measure any item you want and it’s crucial in all construction. Likewise, a currency with a fixed definition of a tangible item will facilitate all market transactions. A fiat currency without a precise definition by its very nature will fluctuate wildly and interfere with all economic calculations. This is why all fiat currencies are destructive and end badly. The dollar since 1971 has been a fiat currency and the mischief it has caused has been especially harmful and broad since it has served as the world reserve currency. The importance of this is evident when the US government is willing to exert military force against those who threaten to abandon the dollar in world trade. All paper or fiat money self-destructs and has limited lifespans. Gold currencies last until governments debase them into a fiat currency. The fiat dollar today, for many nefarious reasons, is constantly being destroyed by counterfeiters posing as politicians and central bankers. The day is fast approaching when the fiat dollar standard will need a major overhaul. The age of “Quantitative Easing” is ending. SUMMATION The trillions of dollars created by the QE program have not restored soundness to the economy. QE did not address the problems caused by a central bank manipulating interest rates, determining the money supply, continuing to monetize government debt, pursuing central planning, and depending on a very unstable fiat currency. Only true monetary reform can address these problems. The economic and political clout that a central bank has in managing a fiat currency system is enormous. Without the government’s ability to create money out of thin air, the cost of financing needless wars and the welfare state would be prohibitive. This arrangement guarantees excessive government and a systematic abuse of liberty. The people lose; the special interests always win. We’re at the point where another QE inflationary binge will not tide us over in the next economic downturn. We’re fast approaching the time when true monetary reform will be required to deal with the “sin” of living beyond our means. If that is not done, expect a long period of economic chaos, inner city violence, and political warfare. Sometimes I’m asked why do I have to be so pessimistic. Actually, many more see me as being optimistic. Optimism comes with a willingness to acknowledge the truth and deal with it in a positive manner with policies that make sense. Accepting bad ideas that purport to provide unlimited free benefits to everyone, is a deception that ends in disappointment. Instead of helping the poor, welfare serves the interest of the wealthy and the bureaucrats. Refusing to change policy will only extend the bad consequences that come from the Federal Reserve’s atrocious mismanagement of monetary policy. In medicine a correct diagnosis of a serious illness can be very depressing, but knowing that treatment is available is uplifting. Remaining in denial of a problem’s severity is a dangerous option. Knowledge and truth lead to optimism. In politics and economics, the only decision to be made is to decide whether or not the goal of peace and prosperity can be best achieved by more intrusive government or by promoting personal liberty. If peace and prosperity are the goal, and flawed policies are identified, an understanding of what needs to be done should be greeted with applause. Fortunately the answers are not complex, and when discovered most agree that they are based on common sense. The philosophy of liberty is based on the moral principle of non-aggression being applied to all individuals and governments. If individuals can’t steal or cheat, neither should the government. If individuals can’t harm or kill, neither should the government. Unfortunately, throughout history it’s been government that has committed the greatest crimes of aggression against humanity. A modest beginning for us would be to rein in government initiated violence by rejecting the Federal Reserve’s authority to finance wars of aggression overseas and the welfare state at home. The political chaos, as reflected by the mess in Washington, is an expected consequence of the last 100 years of our drift away from a limited government philosophy. There is now a growing interest in the cause of liberty as it becomes evident that the current system is financially and morally bankrupt. The intellectual groundwork has been laid for a free society, and with the disintegration of the current system there is room for hope that truth “will out” and a better world for peace and prosperity will be available to us.
By Chris Rossini
When dealing with others, there are two ways to get what you want, one is the way of Liberty, that is, to interact with others on a voluntary basis. The other is the way of tyranny, that is, politics, coercion and force. It should go without saying that Liberty is the superior of the two. No one should use aggressive force against anyone else. Force is for self-defense only, to repel an aggressor. At any point in time, one of these two methods of dealing with one another dominates. When the ideas of Liberty animate a critical majority of people, peace and prosperity dominate. When the ideas of tyranny consume people's minds, war and poverty dominate. It's not complex. The key for human life to thrive is for the ideas of Liberty to dominate. Yet a quick look at mankind's history shows that this is quite the challenge. It's very easy to slip into the seductive lure of tyranny. It starts out very small, like an innocent little snowball, only to turn into a destructive avalanche down the line. This is why a man like Thomas Jefferson said that "Eternal vigilance is the price of liberty." It really is an eternal endeavor. As new generations are born, they are faced with the same choice that confronted Jefferson's generation: Liberty or tyranny? Which will I choose when interacting with others? Since we are all born with the freedom to choose, the choice of tyranny will always be an option. It's not something that is 'wiped out.' On the flip side, tyranny cannot 'wipe out' Liberty either. Our ability to choose is always there. So one must always dominate the other. When you take a casual look at America today, it's quite apparent which one dominates. It seems that everything has become politicized. If someone sneezes, people turn to government to "do something about it." Censorship is making a comeback. Censorship! How many times has that been tried in the past, only to backfire completely... Much like the previous British Empire, which was conducting wars all the time, all over the world, the U.S. foolishly became an empire that has done the same exact thing. Everyone reading this can confidently say that the U.S. has been at war for most of their life! This is what happens when the ideas of tyranny dominate. This is the state of affairs. With that being the case, it's imperative for those who understand the ideas of Liberty to speak out. The tide has to be turned for tyranny to be the minority opinion, and for Liberty to be something that is cherished once again in America. It's in each of our own self-interest to speak. When there are less people sold on the ideas of using government to steal from you, that will mean less people with their hands in your pocket. When less people want war, it gives government no excuse to put the entire country under surveillance. You can say goodbye to the surveillance state. So we each have a very big interest in having the pendulum swing towards Liberty. Staying silent only silently hurts you. Look at all the people who want government to do their bidding. They're surely not silent! They want what you have and they're not afraid to say so. So good people need to speak up, but speak up intelligently. The task is to speak ... not "convince," or "make others believe." You can't spread the message of Liberty like a tyrant. The best analogy on speaking intelligently would be to picture a farmer with his bag of seeds. He heads out to the soil and starts planting abundantly. That's his job. Plant abundantly. His job is not to turn the seedling into a vegetable. That's out of his power. He knows that some of the seeds will wash away with the rain. Others will be pecked at by hungry birds. But he knows that there will be those valuable seeds that take root, and those are the ones that he's working for. So when speaking the ideas of Liberty, the goal is not to "make sure" that the one spoken to comes away believing. That is out of your power. Many will mock. Many others will laugh. So what? Let the mockers mock, and let the laughers laugh. It's all part of the game. Our opponents use other methods for spreading their ideas. They try to jam their ideas down your throat. They try to hide the ideas of Liberty. And if you don't agree with them, they start calling you names. What a frustrating way to go about things. That's not how the side of Liberty goes about it. Our job is to speak (abundantly) and then let it be. The ideas will take root where they have to, and the pendulum will swing in the direction of Liberty once again. But speaking is a must. If the ideas of Liberty reside between your two ears, they can't just stay there. Let the world know that dealing with others voluntarily is the superior way to live.
President Trump's Secretary of State, Mike Pompeo, is driving the US closer to war with Russia over Turkey's land grab in northern Syria. While Trump talks about removing US troops from the Middle East, Pompeo has turned his State Department into a second White House and second Pentagon to launch his own foreign policy. Will Trump continue to allow Pompeo to run the show?
By David Stockman In 1971 Nixon famously said “we are all Keynesians now” as he ash-canned the Bretton Woods gold exchange standard, thereby unleashing fiat central banking on the world economy. At the time, the Keynesian part wasn’t viewed as such a big deal by enlightened opinion. It was supposedly just the Republican Right catching-up with the Great Depression and shedding its vestigial Hooverite regard for balanced budgets. Henceforth the GOP, too, would advocate pump-priming when the bathtub of GDP fell too far below the rim. Fifty years of subsequent history, however, proves the opposite. Nixon’s one-two combo of fiscal activism and unshackled central banking exposed American capitalism to powerful and unrelenting forces of statist assault. At length, the implicit (but erroneous) assumption that capitalism inherently veers toward sub-optimum performance and recessionary swoons became enshrined in a bipartisan policy consensus. The only room for debate was about the timing and magnitude of intervention and the form of the stimulus as between fiscal spending, tax cuts and easy money. Indeed, in the 33 years since Greenspan’s ascension to the Fed chair, you can count on one hand the number of years in which there was no monetary or fiscal stimulus directed at goosing economic growth, jobs and spending. So when you combine quasi-permanent macroeconomic stimulus with the modern Welfare State’s projects of safety nets, health care provision, publicly-supported education and budgetary pork for purportedly disadvantaged groups, regions and industries, you end up with what we have today: Namely, Ersatz Socialism—a form of statism that walks the socialist walk but dares not speak its name. Well, until good old Bernie Sanders came along. While the MSM claims the danger he supposedly poses to all that is sacred—capitalism, freedom, constitutional government, motherhood and apple pie—got a comeuppance from Uncle Joe Biden this week, we think otherwise. When push-comes-to-shove, in fact, there isn’t really a dimes worth of difference between Biden and Sanders—and for that matter between the Dems and the Trumpite GOP, either. At least, not when it comes to the foundation of Ersatz Socialism on which the American economy and governance now rest. Of course, we insert the term “ersatz”, which means an artificial substitute or imitation, to distinguish today’s ad hoc agglomeration of statist policies from classic (and largely academic) socialism, where the state and economy/society were literally coterminous. But ask a bankrupting Kentucky coal mine owner. The state doesn’t need to own the mine to control it or essentially appropriate most of its value. And the same goes for a Medicare doctor. Reimbursement rates, permitted procedures and other terms of patient care all come down from Federal bureaucrats and their contractors, as do the payments. And dare we mention the flag-waving, free market-spouting Iowa soybean farmer. First the Donald expropriates his export sales; then Uncle Sugar sends him a great big subsidy check to compensate for the inconvenience. Likewise, Boeing sells upwards of $35 billion to foreign air carriers each year, but the financing is spiked with billions of Export-Import Bank loan guarantees. So, too, with respect to the lifeblood of the US banking system dominated by the Wall Street based behemoths like JPMorgan, Citigroup, Wells Fargo and Bank of America. The latter along with about 4000 lesser fry collected $550 billion in net interest margin (NIM) last year, from whence most of their profits sprung. And thank you, Federal Reserve, for making the deposit side of the NIM dirt cheap. So in present day America, the dividing line is not between ideological capitalism versus classic socialism, as both the Donald and the Clintonista Dem establishment want us to believe via their heated attacks on Bernie. Instead, it’s between state control and genuine free market decision-making—the latter being a rapidly shrinking corner of the economy. A big part of the confusion lies in the GDP accounting rules. For example, the total US health care sector in 2019 amounted to about $3.9 trillion or nearly 18% of GDP, with 45% of the total running through government accounts (Medicare, Medicaid, public health services etc) and 55% through the private sector. In aggregate terms, these private dollars totaled $2.145 trillion, of which $1.1 trillion was attributable to household spending for insurance, copays, cash pays etc and the balance ran through business accounts, mostly for the employer share of company health plans. Needless to say, that $2.1 trillion of “private” health care expenditure had the government’s fingerprints all over it via the regulatory dragnet imposed on private plans by the ObamaCare rules and a vast expanse of other federal mandates. And on top of that, of course, there was a heavy-duty financing infusion owing to the $300 billion of health care tax expenditures (tax exclusion of employer health plans, medical deductions etc.). Pretty much the same accounting misdirection applies to the education sector, which one way or another is totally dominated by state rules and financing, regardless of the public/private split of dollars expended. In fact, in 2019 the entire education sector totaled about $1.65 trillion or 7.6% of GDP. About $1.3 trillion of this ran through public sector accounts for elementary and secondary schools and public colleges, but another $350 was toted-up under private sector accounts. This included about $50 billion for private child care and pre-school, $70 billion for private and parochial elementary and secondary schools and $215 billion for private colleges and universities. But when it comes to Title IX compliance, the disposition of Federally guaranteed student loans, tax deductions for charitable contributions to schools or the myriad other Federal laws and regulations which apply to private education, this accounting divide is essentially a distinction without a difference. In a word, the giant education and health care sectors represent a combined $5.55 trillion or 25.6% of GDP, but for all practical purposes they are already socialized. Bernie is essentially a day late and not that many dollars long. Indeed, old Bernie saw it was socialism and said its name—even as his policy proposals amount to little more than bringing currently socialized private activity in health care and education more explicitly under the accounting umbrella of state budgets. So when it comes to the policy arguments between Bernie, the Clintonistas and the Trumpite/GOP with respect to this nearly 26% quadrant of the GDP (total health and education), the only real issues are about the mechanisms of state control and funding. For instance, in the health domain, funding and state control is sloganized as Medicare- For-All (Sanders); health mandates for all (Clintonista Dems); and tax credits and pre- existing condition coverage for all (Trumpite/GOP). Accordingly, the better part of valor with respect to the socialist bogeyman is to adjust the GDP accounting in order to grasp the reality. At the first level of direct spending, therefore, the already existing socialized sector of the American economy totaled $9.92 trillion or 45.7% of GDP in 2019. That’s right. We already have European style social democracy where the public sector typically approximates 50% of GDP, albeit obfuscated by accounting conventions. The constituent elements include: • the Federal government sector at $4.97 trillion or 22.9% of GDP; • the state and local sector at $2.45 trillion or 11.3% of GDP; • the “private” portion of the health care sector at $2.145 trillion or 9.9% of GDP; and • the “private” portion of education at $350 billion or 1.6% of GDP. The fact is, when it comes to any issue that could make a measurable difference within this nearly $10 trillion and 46% portion of the US economy which is already socialized, there’s truly not a dime’s worth of difference between Sanders, the Clintonistas and the Big Government besotted Trumpite/GOP. Take the health care sector, for example. The heart of the matter is that it is none of the state’s business whether citizens choose to buy health care insurance or not; and that’s especially true given the fact that what passes for “health insurance” is no such thing because it is not risk-rated per each insured beneficiary. What it actually is amounts to a community-rated and pool-averaged pre-paid medical expense payment system that is a creature of tax subsidies and regulatory mandates. It does not remotely resemble any insurance product that would actually be sold on the free market. To the contrary, on the free market people would shop for health care like everything else; pay for most services with their credit cards or cash; and perhaps purchase individual risk-rated catastrophic coverage for very high dollar, low-frequency medical expenses. But ever since the US leapt over the statist threshold with LBJ to Medicare and Medicaid in 1965, the system has moved inexorably toward socialized pools of high cost pre-paid medical care. The remaining argument between the above three political contestants is how many of these big pre-paid “insurance” pools will exist and the details of what services they cover and how they are paid for. Sometimes a chart is worth a thousand words, and this is one of them. Since 1960 the general price level has risen by 7X while nominal health spending per capita has erupted by 82X. In that stunning leap lies one of Bastiat’s great “not seens” in economic life. That is, American health care essentially went from capitalism to Ersatz Socialism over the intervening 60 year period. The GOP fellow travelers, the Clintonistas and Obama statists did not say it name. Bernie did. In any event, it now is what it is. So Simple Bernie wants to clear the rhetorical and accounting decks with one big prepaid pool (Medicare for All). And he would organize it on a one-size fits all basis with respect to coverages (mostly everything), out-of-pockets (mostly none) and payments (payroll taxes). The Clintonistas seek a vastly expanded Medicare Light (public option). That is to say, a huge enlargement of the existing Medicare pool by eliminating the age restrictions, plus a moderate number of corporate and union-based pools that would continue to exist only if they approximated Bernie’s Medicare for All standards (i.e. coverage of mostly everything and mostly no out-of-pockets). Accordingly, the Clintonista pools (i.e. Biden) would on average cost the same of the Bernie pools on a age/health adjusted basis. The only difference would be whether Uncle Sam extracts the funding through payroll taxes (Sanders) or mandates employers to extract like and similar costs from the total envelope of employee wage and benefits compensation. Of course, the Trumpite/GOP will argue they are manning the barricades against socialized medicine, but that’s mostly stale rhetoric from their grandfathers’ platforms. After losing the ObamaCare fight, the GOP is now four-square for mandates (pre- existing conditions) and tax-credit and employer exclusion induced pre-paid health pools. The only difference is that the Trumpite/GOP would have a lot of government regulated, fiscally enabled employer plans and private group plans along with the giant Medicare/Medicaid pools. But it amounts to the same thing: To wit, high-cost, prepaid, socialized health care pools where the price mechanism plays no role and personal accountability for health care costs is largely non-existent. The litmus test would be rather simple. Would any of the three above described approaches materially reduce the massive waste built into today’s 18% of GDP, $3.9 trillion health care system? Not a chance, and here’s the reason. To wit, the horse of massive health care excess and waste is already out the barn door and that won’t change if a creeping share of the so- called “private” portion of the system is brought under government accounting (as Obamacare did with income based subsidies to private pool purchasers). The reason the social democracies of Europe only spend 9-12% of GDP on health care is that they have been explicitly socialist since WW II. The apparatchiks who run them simple triage and ration health care owing to the limits of public tolerance for payroll taxes. By contrast, in the US we have had socialism for the consumer (heavily subsidized pre- paid, average cost based “insurance” pools) and capitalism for the providers and their powerful K-street lobbies. The latter have inflated the combination of public and private insurance pools to 18% of GDP and mean to hang on to what they have extracted from the system over the last 60 years. Even if Bernie should win, heaven forfend, his health czar would get nowhere shrinking the incumbent 18% of GDP. That’s because any minor amounts they managed to squeeze from the capitalist providers (i.e. drug companies) would likely end up paying for new benefits favored by the Sandernista ground forces that would have elected him. The same is true of education, and especially higher education where Bernie is blowing the horn loudly about the nation’s insane $1.6 trillion of student debt. The fact is, there shouldn’t be anything that resembles student loans because you can’t underwrite the future earnings prospects of 20-year olds. So what all of this “loan” funding has done is to drastically inflate the cost of education. The US figure of 7.6% of GDP for all education levels, in fact, is well above the 4-5% level of most other advanced countries, which practice actual education socialism rather than its ersatz cousin. At the end of the day, the Clintonistas stand for free public education light (i.e. means testing for the very high income), and the Trumpite/GOP proposes to get to the same place with tax credits, public paid school vouchers and various student loan deferment and forgiveness schemes that are only slightly less generous than Bernie’s burn the mortgages plan. Beyond education and health care, there is literally nothing doing except for the typical GOP symbolic gesture to cut say $15 billon per year from food stamps. That amounts to about 0.008% of Federal social insurance and welfare spending outside of health care, and 0.002% of the total $10 trillion socialized sector of the US economy. In effect, after the Donald took Social Security off the table and the GOP’s even tepid attempt to supplant ObamaCare failed, it was all over except the shouting. Not only is the 45.7% of GDP already directly socialized off-the-table in terms of any meaningful 2020 campaign debate, the real socialist elephant in the room has not even gotten an honorable mention—-except for the Donald’s blustering demand for even more socialized money. We are referring to the Fed, of course, and as long as two of the three contending forces seeking the White House want to beat the tom-toms against socialism, let them ponder the fact that virtually every financial asset price on Wall Street is pegged, rigged and boosted by the Federal Reserve. That’s just more Ersatz socialism but of the very worst kind: It involves capitalist upside for the gamblers and socialist safety nets when their speculations fail. So there is a debate in the presidential contest, but it’s not about socialism, which is already here. Indeed, it’s not about any serious policy differences at all. Apparently, mere political theatre will more than suffice. This article was reprinted with permission from David Stockman's Contra-Corner.
David Stockman began his career in Washington as a young man and quickly rose through the ranks of the Republican Party to become the Director of the Office of Management and Budget under President Ronald Reagan. After leaving the White House, Stockman had a 20-year career on Wall Street. Stockman is an Advisory Board member for the Ron Paul Institute for Peace and Prosperity.
After a "Super Tuesday 2" campaign update from Ron Paul, today's program looks at yet more US military deaths in Iraq. The 17 year war continues to take US (and Iraqi) lives even after the Iraqi parliament voted this year to remove foreign troops from Iraqi soil. What are they fighting for? Does anyone know?
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