★Economics is Phatt!

Fear the Boom and Bust
Second Round
Hayek’s Gift

A five-minute summary of The Road to Serfdom

Smart People!

F.A. Hayek

And, of course, there’s the other Hayek who has a hard time being noticed because of the famous economist with the same name. If you are in the movie industry, please help this poor thing find some work. It’s hard enough sharing a name with the famous economist, but remember – ugly people have to eat too.

Ayn Rand – Love her or hate her, you can’t ignore her. Well, not if you’re smart anyway.
Jeff Dumas
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A government is the most dangerous threat to man’s rights: it holds a legal monopoly on the use of physical force against legally disarmed victims.

Do not ever say that the desire to “do good” by force is a good motive. Neither power-lust nor stupidity are good motives.

Government “help” to business is just as disastrous as government persecution… the only way a government can be of service to national prosperity is by keeping its hands off.

Individual rights are not subject to a public vote; a majority has no right to vote away the rights of a minority; the political function of rights is precisely to protect minorities from oppression by majorities (and the smallest minority on earth is the individual).

It only stands to reason that where there’s sacrifice, there’s someone collecting the sacrificial offerings. Where there’s service, there is someone being served. The man who speaks to you of sacrifice is speaking of slaves and masters, and intends to be the master.

Man’s unique reward, however, is that while animals survive by adjusting themselves to their background, man survives by adjusting his background to himself.

People create their own questions because they are afraid to look straight. All you have to do is look straight and see the road, and when you see it, don’t sit looking at it – walk.

The man who lets a leader prescribe his course is a wreck being towed to the scrap heap.

The only power any government has is the power to crack down on criminals. Well, when there aren’t enough criminals, one makes them. One declares so many things to be a crime that it becomes impossible for men to live without breaking laws.

The purpose of morality is to teach you, not to suffer and die, but to enjoy yourself and live.

The question isn’t who is going to let me; it’s who is going to stop me.

We are fast approaching the stage of the ultimate inversion: the stage where the government is free to do anything it pleases, while the citizens may act only by permission; which is the stage of the darkest periods of human history, the stage of rule by brute force.

When I die, I hope to go to Heaven, whatever the Hell that is.

Wealth is the product of man’s capacity to think.

The most depraved type of human being is the man without a purpose.

I just made that pic and now realize that I didn’t include on it who it was. It was Adam Smith.

Life, faculties, production—in other words, individuality, liberty, property—this is man. And in spite of the cunning of artful political leaders, these three gifts from God precede all human legislation, and are superior to it. Life, liberty, and property do not exist because men have made laws. On the contrary, it was the fact that life, liberty, and property existed beforehand that caused men to make laws in the first place.

When under the pretext of fraternity, the legal code imposes mutual sacrifices on the citizens, human nature is not thereby abrogated. Everyone will then direct his efforts toward contributing little to, and taking much from, the common fund of sacrifices. Now, is it the most unfortunate who gains from this struggle? Certainly not, but rather the most influential and calculating.

Government is the great fiction through which everybody endeavors to live at the expense of everybody else.

People are beginning to realize that the apparatus of government is costly. But what they do not know is that the burden falls inevitably on them.

Law cannot organize labor and industry without organizing injustice.

The plans differ; the planners are all alike…

Now, legal plunder can be committed in an infinite number of ways. Thus we have an infinite number of plans for organizing it: tariffs, protection, benefits, subsidies, encouragements, progressive taxation, public schools, guaranteed jobs, guaranteed profits, minimum wages, a right to relief, a right to the tools of labor, free credit, and so on, and so on. All these plans as a whole—with their common aim of legal plunder—constitute socialism.

But how is this legal plunder to be identified? Quite simply. See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime.

It is easy to understand why the law is used by the legislator to destroy in varying degrees among the rest of the people their personal independence by slavery, their liberty by oppression, and their property by plunder. This is done for the benefit of the person who makes the law, and in proportion to the power that he holds.

If you wish to prosper, let your customer prosper. When people have learned this lesson, everyone will seek his individual welfare in the general welfare. Then jealousies between man and man, city and city, province and province, nation and nation, will no longer trouble the world.

Here I encounter the most popular fallacy of our times. It is not considered sufficient that the law should be just; it must be philanthropic. Nor is it sufficient that the law should guarantee to every citizen the free and inoffensive use of his faculties for physical, intellectual, and moral self-improvement. Instead, it is demanded that the law should directly extend welfare, education, and morality throughout the nation.

It is easier to show the disorder that must accompany reform than the order that should follow it.

The sort of dependence that results from exchange, i.e., from commercial transactions, is a reciprocal dependence. We cannot be dependent upon a foreigner without his being dependent on us. Now, this is what constitutes the very essence of society. To sever natural interrelations is not to make oneself independent, but to isolate oneself completely.

…the statement, “The purpose of the law is to cause justice to reign,” is not a rigorously accurate statement. It ought to be stated that the purpose of the law is to prevent injustice from reigning. In fact, it is injustice, instead of justice, that has an existence of its own. Justice is achieved only when injustice is absent.

But we assure the socialists that we repudiate only forced organization, not natural organization. We repudiate the forms of association that are forced upon us, not free association. We repudiate forced fraternity, not true fraternity. We repudiate the artificial unity that does nothing more than deprive persons of individual responsibility. We do not repudiate the natural unity of mankind under Providence.

Socialism, like the ancient ideas from which it springs, confuses the distinction between government and society. As a result of this, every time we object to a thing being done by government, the socialists conclude that we object to its being done at all. We disapprove of state education. Then the socialists say that we are opposed to any education. We object to a state religion. Then the socialists say that we want no religion at all. We object to a state-enforced equality. Then they say that we are against equality. And so on, and so on. It is as if the socialists were to accuse us of not wanting persons to eat because we do not want the state to raise grain. Since law necessarily requires the support of force, its lawful domain is only in the areas where the use of force is necessary. This is justice. Every individual has the right to use force for lawful self-defense. It is for this reason that the collective force—which is only the organized combination of the individual forces—may lawfully be used for the same purpose; and it cannot be used legitimately for any other purpose. Law is solely the organization of the individual right of self-defense which existed before law was formalized. Law is justice.

The law is justice—simple and clear, precise and bounded. Every eye can see it, and every mind can grasp it; for justice is measurable, immutable, and unchangeable. Justice is neither more than this nor less than this. If you exceed this proper limit—if you attempt to make the law religious, fraternal, equalizing, philanthropic, industrial, literary, or artistic—you will then be lost in an uncharted territory, in vagueness and uncertainty, in a forced utopia or, even worse, in a multitude of utopias, each striving to seize the law and impose it upon you. This is true because fraternity and philanthropy, unlike justice, do not have precise limits. Once started, where will you stop? And where will the law stop itself?

Law is justice. In this proposition a simple and enduring government can be conceived. And I defy anyone to say how even the thought of revolution, of insurrection, of the slightest uprising could arise against a government whose organized force was confined only to suppressing injustice. … As proof of this statement, consider this question: Have the people ever been known to rise against the Court of Appeals, or mob a Justice of the Peace, in order to get higher wages, free credit, tools of production, favorable tariffs, or government-created jobs? Everyone knows perfectly well that such matters are not within the jurisdiction of the Court of Appeals or a Justice of the Peace. And if government were limited to its proper functions, everyone would soon learn that these matters are not within the jurisdiction of the law itself.

If the natural tendencies of mankind are so bad that it is not safe to permit people to be free, how is it that the tendencies of these organizers are always good? Do not the legislators and their appointed agents also belong to the human race? Or do they believe that they themselves are made of a finer clay than the rest of mankind?

It seems to me that this is theoretically right, for whatever the question under discussion—whether religious, philosophical, political, or economic; whether it concerns prosperity, morality, equality, right, justice, progress, responsibility, cooperation, property, labor, trade, capital, wages, taxes, population, finance, or government—at whatever point on the scientific horizon I begin my researches, I invariably reach this one conclusion: The solution to the problems of human relationships is to be found in liberty.

Away with the whims of governmental administrators, their socialized projects, their centralization, their tariffs, their government schools, their state religions, their free credit, their bank monopolies, their regulations, their restrictions, their equalization by taxation, and their pious moralizations!

And now that the legislators and do-gooders have so futilely inflicted so many systems upon society, may they finally end where they should have begun: May they reject all systems, and try liberty; for liberty is an acknowledgment of faith in God and His works.

David Hume
~“Contracting debt will almost infallibly be abused in every government. It would scarcely be more imprudent to give a prodigal son a credit in every banker’s shop in London, than to empower a statesman to draw bills on posterity.”

I got some of this from the Library of Economics and Liberty …
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Though better known for his treatments of philosophy, history, and politics, the Scottish philosopher David Hume also made several essential contributions to economic thought. His empirical argument against British mercantilism formed a building block for classical economics. His essays on money and international trade published in Political Discourses strongly influenced his friend and fellow countryman adam smith.

British mercantilists believed that economic prosperity could be realized by limiting imports and encouraging exports in order to maximize the amount of gold in the home country. The American colonies facilitated this policy by providing raw materials that Britain manufactured into finished goods and reexported back to the colonial consumers in America. Needless to say, the arrangement was short-lived.

But even before the American Revolution intervened in mercantilistic pursuits, David Hume showed why net exporting in exchange for gold currency, hoarded by Britain, could not enhance wealth. Hume’s argument was essentially the monetarist quantity theory of money: prices in a country change directly with changes in the money supply. Hume explained that as net exports increased and more gold flowed into a country to pay for them, the prices of goods in that country would rise. Thus, an increased flow of gold into England would not necessarily increase England’s wealth substantially.

Hume showed that the increase in domestic prices due to the gold inflow would discourage exports and encourage imports, thus automatically limiting the amount by which exports would exceed imports. This adjustment mechanism is called the price-specie-flow mechanism. Surprisingly, even though Hume’s idea would have bolstered Adam Smith’s attack on mercantilism and argument for free trade, Smith ignored Hume’s argument. Although few economists accept Hume’s view literally, it is still the basis of much thinking on balance-of-payments issues.

Considering Hume’s solid grasp of monetary dynamics, his misconceptions about money behavior are all the more noteworthy. Hume erroneously advanced the notion of “creeping inflation”—the idea that a gradual increase in the money supply would lead to economic growth.

Hume made two other major lasting contributions to economics. One is his idea, later elaborated by friedrich hayek in The Road to Serfdom, that economic freedom is a necessary condition for political freedom. The second is his assertion that “you cannot deduce ought from is”—that is, value judgments cannot be made purely on the basis of facts. Economists now make the same point by distinguishing between normative (what should be) and positive (what is).

Hume died the year The Wealth of Nations was published, and in the presence of its author, Adam Smith.

But though this progress of human affairs may appear certain and inevitable, and though the support which allegiance brings to justice, be founded on obvious principles of human nature, it cannot be expected that men should beforehand be able to discover them, or foresee their operation. Government commences more casually and more imperfectly. It is probable, that the first ascendant of one man over multitudes begun during a state of war; where the superiority of courage and of genius discovers itself most visibly, where unanimity and concert are most requisite, and where the pernicious effects of disorder are most sensibly felt. The long continuance of that state, an incident common among savage tribes, enured the people to submission; and if the chieftain possessed as much equity as prudence and valour, he became, even during peace, the arbiter of all differences, and could gradually, by a mixture of force and consent, establish his authority. The benefit sensibly felt from his influence, made it be cherished by the people, at least by the peaceable and well disposed among them; and if his son enjoyed the same good qualities, government advanced the sooner to maturity and perfection; but was still in a feeble state, till the farther progress of improvement procured the magistrate a revenue, and enabled him to bestow rewards on the several instruments of his administration, and to inflict punishments on the refractory and disobedient. Before that period, each exertion of his influence must have been particular, and founded on the peculiar circumstances of the case. After it, submission was no longer a matter of choice in the bulk of the community, but was rigorously exacted by the authority of the supreme magistrate.

In all governments, there is a perpetual intestine struggle, open or secret, between Authority and Liberty; and neither of them can ever absolutely prevail in the contest. A great sacrifice of liberty must necessarily be made in every government; yet even the authority, which confines liberty, can never, and perhaps ought never, in any constitution, to become quite entire and uncontroulable. The sultan is master of the life and fortune of any individual; but will not be permitted to impose new taxes on his subjects: a French monarch can impose taxes at pleasure; but would find it dangerous to attempt the lives and fortunes of individuals. Religion also, in most countries, is commonly found to be a very intractable principle; and other principles or prejudices frequently resist all the authority of the civil magistrate; whose power, being founded on opinion, can never subvert other opinions, equally rooted with that of his title to dominion. The government, which, in common appellation, receives the appellation of free, is that which admits of a partition of power among several members, whose united authority is no less, or is commonly greater than that of any monarch; but who, in the usual course of administration, must act by general and equal laws, that are previously known to all the members and to all their subjects. In this sense, it must be owned, that liberty is the perfection of civil society; but still authority must be acknowledged essential to its very existence: and in those contests, which so often take place between the one and the other, the latter may, on that account, challenge the preference. Unless perhaps one may say (and it may be said with some reason) that a circumstance, which is essential to the existence of civil society, must always support itself, and needs be guarded with less jealousy, than one that contributes only to its perfection, which the indolence of men is so apt to neglect, or their ignorance to overlook.

Thomas Jefferson

The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered.

Types of Money

Commodity money has a value or use aside from its use as money. During the late eighteenth century, farmers in the Pennsylvania backcountry used whiskey for money. They bought and sold items by the jug. In ancient Rome soldiers were paid in salt. Cows-as-money would fit into this category, too. The idea is simple: if whiskey is money, then you can use it in economic transactions… or you can just drink it if you feel the urge. The money is, itself, a real thing with its own inherent value.

The next type, representative money, can be redeemed for something of real value. In the past, most representative money was backed by gold and silver. Countries pegged the value of their currency to a certain amount of the precious metal and promised to exchange their currency for the metal on demand. In other words, if you had a hundred dollar bill, you could walk into the U.S. Mint and exchange your paper for a hundred dollars’ worth of gold. Gold was a real thing with real value; the paper money had value only because it was redeemable for gold.

Finally, we get to fiat money (the stuff in your wallet), which is money because the government says it is. It is not backed by gold or any other substance of real value. It has no real use or value other than its value as a form of currency. And its value is thus set by the market forces of supply and demand, just like everything else. As long as people want dollars, they will have value. If everyone in the world suddenly decided tomorrow that dollars are worthless… well, then they’d be worthless.

In response to Smart_Routines_With_Enthusiasm’s post:
WE need to go back to trading for things we need not want. Good thread!

Thank you! I’m just getting started!

Is the US headed for hyperinflation?

A Brief History of Inflation

This is why so many people, people like me, talk about the “gold standard” and the Federal Reserve.

Economics is not only PHATT, it’s SCARY TOO!

Here is a very spooky video about Fractional Banking

I love the Saran Ban Breathnac quote .I have just got her latest book off the bookshelf to read after buying it months ago .

Peace and Plenty

This is the introduction from “Defending the Undefendable” by Walter Block. The book discusses economics, but the introduction has such a well written explanation of Libertarianism that I wanted to share it. If you would like to read the whole book it is available on the web at mises.org. I downloaded the pdf for free.

Introduction

The people presented in this book are generally considered villainous, and the functions they perform, harmful. Sometimes society itself is damned because it spawns such reprehensible characters. However, the thrust of this book will concentrate on the following propositions:

1. they are guilty of no wrongdoing of a violent nature;
2. in virtually every case, they actually benefit society;
3. if we prohibit their activities, we do so at our own loss.

The impetus for this book is Libertarianism. The basic premise of this philosophy is that it is illegitimate to engage in aggression against non-aggressors. What is meant by aggression is not assertiveness, argumentativeness, competitiveness, adventurousness, quarrelsomeness, or antagonism. What is meant by aggression is the use of violence, such as that which takes place in murder, rape, robbery, or kidnapping. Libertarianism does

not imply pacifism; it does not forbid the use of violence in defense or even in retaliation against violence. Libertarian philosophy condemns only the initiation of violence—the use of violence against a nonviolent person or his property.

There is nothing untoward or controversial about such a view. Most people would give it their wholehearted support. Indeed, this sentiment is part and parcel of our Western civilization, enshrined in the law, in our Constitution, and in the natural law.

The uniqueness of Libertarianism is found not in the statement of its basic principle but in the rigorously consistent, even maniacal manner with which the principle is applied. For example, most people do not see any contradiction between this principle and our system of taxation. Libertarians do.

Taxation is contrary to the basic principle because it involves aggression against non-aggressive citizens who refuse to pay. It makes not the slightest difference that the government offers goods and services in return for the tax money. What is important is that the so-called “trade” (tax money for government services) is coerced. The individual is not free to reject the offer. Nor does the fact that a majority of the citizens support this
coercive taxation make any difference. The initiation of aggression, even when endorsed by the majority, is not legitimate. Libertarianism condemns it in this area as it condemns it wherever it occurs.

Another difference between the beliefs of Libertarians and the beliefs of other members of society is the obverse of the view that initiatory violence is evil. Libertarians maintain that as far as political theory is concerned, anything which does not involve the initiation of violence is not evil and that as far as political theory is concerned, anything which does not involve the initiation of violence is not a punishable evil and should not be outlawed. And this is the basis for the first part of my argument. The so-called “villains” are not villains at all, in this sense, because they do not initiate violence against non-aggressors.

Once it is realized that no one in this seeming rogue’s gallery is guilty of any coercive wrongdoing, it is not difficult to appreciate the second point: virtually all of the people with whom we are concerned are responsible for benefiting the rest of society. The people we are considering are not aggressors. They do not force themselves on anyone. If the other members of the community have any dealings with them, these dealings are voluntary. People engage in voluntary transactions because they feel that some benefit can be derived. Since people voluntarily trade with our “villains,” they must get from them something they desire. The “villains” must be providing a benefit.

The third premise follows ineluctably from the second. Given that voluntary trade (the only avenue of interaction open to those who, like the scapegoats, have eschewed violence) must always benefit all parties, it follows that the prohibition of voluntary trade must harm all parties. In fact, my point is even stronger. I will argue that prohibiting the activities of the people we are considering harms not only the potential parties to the trade, but it can seriously harm third parties. One blatant example is the prohibition of the activities of the heroin seller. In addition to harming the seller and the customer, the prohibition of the sale of heroin is responsible for a high proportion of the crime committed in our society, for police graft, and in many areas, for the general breakdown of law and order.

The chief point I wish to make in this introduction—the core of my position—is that there is a crucial difference between the initiation of aggression and all other acts which, while they may displease us, do not involve such aggression. It is only the act of aggressive violence that violates man’s rights. Refraining from aggressive violence must be considered a fundamental law of society. The people dealt with in this book, though reviled by the media and condemned out of hand by almost everyone, do not violate anyone’s rights, so they should not be subjected to judicial sanctions. It is my belief that they are scapegoats—they are visible, they are available to attack, but they must be defended, if justice is to prevail.

This book is a defense of the marketplace. It singles out for special praise those participants in the free enterprise system who are the most reviled by its critics. It does so because if the price system can be shown to be mutually beneficial and productive in these extreme examples, then the case for markets in general is strengthened even the more.

However, it is important to counteract one possible misinterpretation. This book does not claim that the marketplace is a moral economic institution. True, the profit and loss business system has brought mankind a plethora of consumer goods and services unknown in the entire history of the world. These benefits are the envy of all peoples not fortunate enough to live under its banner. Given the tastes, desires, preferences of the ultimate consumer, the market is the best means known to man for providing for his satisfaction.

But the marketplace also produces goods and services—such as gambling, prostitution, pornography, drugs (heroin, cocaine, etc.), alcohol, cigarettes, swinger’s clubs, suicide abettment—whose moral status is, to say the least, highly questionable and in many cases highly immoral. The free enterprise system, thus, cannot be considered a moral one. Rather, as a means of consumer satisfaction, it can only be as moral as are the goals of the market participants themselves. Since these vary widely, all the way from the completely depraved and immoral to the entirely legitimate, the market must be seen as amoral—neither moral nor immoral.

The market in other words is like fire, or a gun, or a knife, or a typewriter: a splendidly efficient means toward both good and bad ends. Through free enterprise we are capable of achieving virtuous actions, but also their very opposite as well.

How, then, can we defend the immoral activities of some market actors? This stems from the philosophy of libertarianism, which is limited to analyzing one single problem. It asks, under what conditions is violence justified? And it answers, violence is justified only for purposes of defense, or in response to prior aggression, or in retaliation against it. This means, among other things, that government is not justified in fining, punishing, incarcerating, imposing death penalties on people who act in an immoral manner—as long as they refrain from threatening or initiating physical violence on the persons or property of others. Libertarianism, then, is not a philosophy of life. It does not presume to indicate how mankind may best live. It does not set out the boundaries between the good and the bad, between the moral and the immoral, between propriety and impropriety.

The defense of such as the prostitute, pornographer, etc., is thus a very limited one. It consists solely of the claim that they do not initiate physical violence against non-aggressors. Hence, according to libertarian principles, none should be visited upon them. This means only that these activities should not be punished by jail sentences or other forms of violence. It decidedly does not mean that these activities are moral, proper, or good.

Walter Block

One of the most important books you could ever read is Frederick Bastiat’s Law.
I found the book broken down into chapters on youtube.
The Law

I also found an audio that can be downloaded.
The Law

Required reading for everyone.

Watch this several times until you can actually understand it well enough to explain it. How the fed creates money and steals from the taxpayer