February 16, 2019

Michael Moore Wants to End the Fed (He Just Doesn’t Realize It)

 

“You keep on using that word. I do not think it means what you think it means.”

– Mandy Patinkin as Inigo Montoya in The Princess Bride (1987)

It is ironic that Michael Moore’s latest movie, Capitalism: A Love Story features two appearances by writer and comedic actor Wallace Shawn. There is even a clip of Shawn exclaiming “Inconceivable!” in his hilarious turn as Vezzini in The Princess Bride. However, the most appropriate clip from that movie would have been Inigo Montoya uttering the words quoted in the prologue of this article. Using one of Moore’s staple filmmaking techniques, he could have cut to the clip immediately after one of his own pronouncements about capitalism. For although Moore says the word over and over throughout the movie, it is apparent that it “doesn’t mean what he thinks it means.”

The closest thing to a definition of capitalism that Moore provides to his audience comes early on when he remarks, “Capitalism: a system of giving and taking – mostly taking.” He goes on to show a half dozen or so clips of people extolling capitalism for providing “the freedom to succeed and to fail” or hailing the virtues of competition. However, the common mistake made by both Moore when attacking capitalism and the Republican politicians he depicts defending it is their mutual failure to recognize the central tenet of capitalism: property rights.

True capitalism is based upon one simple principle: that all exchanges of property are made with the voluntary consent of all parties. Private ownership of property and competition – the other two components of capitalism in most traditional definitions – are actually results of this foundational principle. As all governments are institutions of coercion, there is no way for them to acquire property through voluntary exchange. Further, with all exchanges being voluntary, sellers must by definition compete with one another in order to sell their products. So, the foundation of “capitalism” is really the non-aggression principle applied to property. Capitalism requires that no one’s property can be taken from them without their consent.

However, Moore’s film does not examine anything close to that system, which Adam Smith called “a system of natural liberty” (the word “capitalism” was not coined until nearly a century later). There is a good reason for that – it doesn’t exist. What Moore mistakes for capitalism is really the soft fascism that has been increasing in intensity in the United States since the Federal Reserve and income tax were created and property rights were destroyed. He makes the same mistake that Republican voters make when they vote Republican politicians into office. They believe the politicians when they say that they support “free markets,” despite the fact that they go on to govern in exactly the opposite way.

The injustices that Moore depicts in his film are without exception caused by government. Not one can be traced to people voluntarily exchanging their goods and services with one another. What Moore represents as “capitalism” is really what Thomas Dilorenzo described as “Hamilton’s Curse” in his 2008 book of the same name. Without attempting to reduce Dilorenzo’s treatise to a few sentences, he generally describes the economic system whereby the government allies itself with the wealthiest segment of society in order to plunder the wealth of everyone else in pursuit of “national greatness” or “the common good.” The hallmarks of the system are corporate welfare, deficit spending by government, protectionist tariffs, and most importantly, a central bank with a government-granted monopoly on the creation of money.

This system purports to benefit society by encouraging the growth of domestic industry and thereby increasing the power and standing of the nation as a whole, as well as providing employment for the working class. However, like socialism, it must achieve “societal goals” by violating the fundamental principle of capitalism. It must violate the non-aggression principle by taking property away from people without their consent and redistributing that property to others. Some of this is accomplished through taxation. A much greater part is accomplished through monetary inflation.

It is astounding that most people are able to ignore the fact that the central bank is an instrument of theft and thereby completely antagonistic to capitalism. It takes an incredible dearth of healthy skepticism not to question the reason for legal tender laws, which force people to use the central bank’s currency. There is only one reason for these laws: without them no one would choose to accept an un-backed paper currency in exchange for their real goods or services. People are forced to use Federal Reserve Notes so that the government and its corporate allies can use inflation (expansion of the money supply) to transfer wealth from everyone in society to the privileged few who benefit from the transfer. The beneficiaries include corporate defense contractors, large farming corporations, Wall Street banks, and other “pillars of the economy.” It is inflation more than anything else that widens the gap between rich and poor. It is the chief vehicle for what Bastiat described as “the few plunder the many.”

However, Michael Moore does not recognize the right to the fruits of one’s labor and so he is completely blind to the difference between capitalism and the system promoted by Republican politicians (in deed if not in word). He fails to see that every aspect of our financial meltdown was caused by some violation of property rights, representing a departure from capitalism.

The money needed to extend all of those “deceptive mortgages” was created by the Federal Reserve out of thin air, thus diluting the value of all existing U.S. dollars. This was a theft from the holders of those existing dollars. Most of the loans themselves were guaranteed by Fannie and Freddie Mac, which uses the coercive power of government to force taxpayers to put up their money as collateral for people who would either not receive those loans or who would pay a much higher interest rate without it.  Again, this is not capitalist voluntary exchange but instead wealth redistribution and a distortion of the free market. Similarly, the hundreds of billions paid out to defense contractors and other beneficiaries of President Bush’s wars in the Middle East were also funded by inflation, which the Republicans overtly flaunted by cutting taxes while skyrocketing government spending.

Since he fails to recognize that it was violation of property rights that truly caused our economic meltdown, he doesn’t recommend the restoration of property rights as the solution. Moore blindly accepts the traditional “progressive” fallacy that free market participants can only benefit at someone else’s expense, instead of recognizing that people who exchange voluntarily do so to their mutual benefit. As a result, he accepts government’s role as plunderer of property and merely suggests dividing up the loot differently. He promotes the bogus idea that the government can grant rights to people, and suggests that the coercive power of government no longer be used to redistribute to the wealthy, but instead be used to redistribute to everyone else. He objects to a system wherein the few plunder the many, but suggests it be replaced with a system where “everybody plunders everybody.”

Moore asserts that FDR had the answer when he proposed a “Second Bill of Rights,” granting Americans the right to a reasonable wage, health care, a pension, and other entitlements. Again, as the concept of property rights is foreign to him, Moore is able to ignore the fact that granting a right to these things means that those who provide them have no rights. He extols the “justice” of labor unions, but ignores the fact that it was the unions that destroyed the U.S. automakers by claiming exactly these rights. It was actually an alliance between government and these unions – identical in principle to the alliance between government and Wall Street – that turned his beloved Flint into a ghost town. He suggests that we should set these forces loose upon all of society. His ability to ignore reality is, to quote Mr. Shawn, “inconceivable.”

Like all of his movies, Capitalism: A Love Story is very well made. Moore is exceptionally good at what he does, bringing wit, comedic timing, and emotional power to the screen. Also like all of his movies, he identifies real injustices and expresses appropriate outrage at them. However, throughout his distinguished career he has made the classic mistake of misidentifying the cause of the problems he depicts so poignantly on the screen.

He compares the United States to Rome and points to the similarities between our problems and theirs. He correctly identifies half of the cause of Rome’s decline and ours: the government’s unholy alliance with a landed aristocracy that plunders the wealth of the people for redistribution to the privileged few. However, he fails to recognize his solution as the other half of the cause of both Rome’s decline and ours: the rest of society attempting to share in the plunder by means of majority vote (democracy). It was both of these forces acting together which destroyed Rome’s currency and led to her eventual collapse. Like Rome, we are also afflicted with both of these ills.

The only real solution to our predicament is to implement a system that supports Bastiat’s third alternative – “where nobody plunders anybody.” It is only by following this principle that justice can truly prevail. The most significant step in achieving such a system would be to eliminate the Federal Reserve System. Neither the Republican system of plunder for the wealthy nor the Democratic system of plunder for everybody is possible without monetary inflation. There is no way that government could ever achieve either through direct taxation.

I believe that Michael Moore’s intentions are good. At the end of his film, he asks Americans to join him. I have an alternative proposition for him. If he truly wants to see justice restored in America, along with equal opportunity for all Americans to pursue their happiness, he should call off his misguided attack on capitalism and join us to End the Fed.

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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© Thomas Mullen 2009

>The Misguided Outcry for "Perp Walks"

>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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>Be Careful What You Fight For

>There is one positive consequence of the economic collapse that is occurring, and the futile attempt by the government to stop it with money stolen from its constituents: the American public has woken up. Despite the best efforts of the major media outlets to spin this the way the government would like, it is apparent that mainstream America is mighty angry that they are being fleeced to prop up the financial system. I hope that anger does not fade with the passage of time – at least not until after November 4th. While wholesale changes are unlikely, it would be nice to see a few incumbents packing after this election and replaced by non-Republicrats. It would be an encouraging sign of things to come.

However, as good as it is to finally see some outrage over the destruction of our Republic, there is still a long way to go. Listening closely to the cries of anger, it is apparent that the majority of Americans still haven’t found their way to actually demanding their freedom. While they are angry, it seems that government has successfully channeled their anger in the wrong direction. Generally, Americans are mad at Wall Street, and are blaming this crisis on “greed.” To the extent that they fault government, they are blaming the crisis on “not enough regulation on Wall Street” and even (ugh) “too much laissez faire capitalism.” This of course plays right into the government’s hands, because the answer to “too much laissez faire capitalism” is more government intervention into the marketplace – which was the REAL cause of this problem in the first place.

If anything, the number one clue that it was not free enterprise that caused this debacle is that the government says it was. By now, every American should know to listen carefully to everything that the Bush Administration says and assume that exactly the opposite is true. However, decades of conditioning to mistrust the free market is paying off for the government, at least for the time being. They have turned this into a class war, instead of an ideological one. They have Americans indiscriminately resenting the wealthy, whether they earned their money legitimately or not. They have Americans condemning corporations, whether they achieved their place in the market legitimately or not. While Americans are mad at their government, they have been convinced, for the moment, that government’s failure was not protecting the average American from the evils of capitalism.

Of course, the truth is that this crisis was a failure of socialism, not capitalism. It was the socialist idea that every American was entitled to a house, and that taxpayers must pay for them, that led to the creation of Fannie Mae and Freddie Mac. Those companies guaranteed mortgages to people that would not have received them in a free market. Only the ability of the government to forcibly collect taxes to back those mortgages allowed the lenders to offer them. If there was any doubt that the government was backing Fannie and Freddie with taxpayer money, that doubt was removed when the government took over the companies when their inevitable failure occurred.

Even with the GSE’s in place, it took another socialist institution, the Federal Reserve, to supply the imaginary money needed to lend to all of those “sub-prime” borrowers. Without the imaginary “liquidity” provided by the Fed, the loans could never have been made and the home prices could never have been bid up so far. The Fed merely blew up another bubble, as it has been doing since the day it opened its doors in 1913.

What these interventions into the marketplace do is create artificial demand. Everyone knows that an increase in demand, while supply remains equal (or when the increase in demand outpaces an increase in supply), results in an increase in price levels. However, demand is not merely the desire to purchase a product, but also the ability to do so. If demand were merely the desire to have something, there would be unlimited demand for all products and services, taking most of the challenge out of running a successful business! The Fed and Fannie Mae certainly didn’t increase the number of people who desired to have a house, but it dramatically increased their purchasing power. In fact, the combination of easy money and credit by the Fed and the incentive for lax lending standards represented a massive increase in demand over the entire housing market, with the predictable dramatic increase in home prices. None of this represents free market forces at work. It is textbook socialist central planning and wealth redistribution.

That brings us to the government “solution,” and what Americans should really be mad about. Our government is now going to forcibly extort trillions of dollars from us in a misguided attempt to maintain the artificial conditions it created in the market. It won’t work. They have tried it many times, and it has never worked. The artificial demand drove prices far above their natural level, and natural market forces are now pushing them back down. Borrowers were lent money that they were never going to be able to pay back. What is worse, a large percentage took the artificial equity caused by the rise in price of their homes in home equity loans and spent it. That money is gone, and the borrowers can’t pay it back. Government taking possession of the mortgages isn’t going to change that. Those borrowers are still going to default, and the home prices are eventually going to go where they naturally must go. Economic forces are like forces of nature. In the end they cannot be stopped.

This intervention is practically identical to the interventions attempted during the Roosevelt administration in the 1930’s, which turned a severe 2-year recession into a crushing, 10-year depression. This bailout will have devastatingly similar results. It doesn’t matter whether a CEO gets away with a $10 million dollar bonus or not. What matters is tens of millions of Americans unemployed for a very, very long time. THAT will be the result of government’s attempts to maintain the artificial conditions in the economy that GOVERNMENT created in the first place.

Since the Austrian economists predicted all of this, while the Keynesians did not, it might pay to listen to what the Austrians suggest as a solution to these government-created crises. While their first advice was always not to create the problems in the first place, they certainly were clear about what to do when the inevitable bubble bursts occurred. Not surprisingly, they advised us to do EXACTLY THE OPPOSITE of what the government proposes. The cure for the recession, according to the Austrians, was to EASE regulation on business, especially in the labor market, and allow the quickest, smoothest reallocation of resources (including human resources) that was possible. As government intervention had created the problem, more government intervention was not going to solve it. In fact, any intervention could only make it worse, no matter what form it took. That is because the wealth creating mechanism of capitalism depends upon the participants making their decisions voluntarily, and government intervention represents forcing people to make different choices. This is really what most Americans are demanding from their government right now – for government to force market participants to choose differently than they otherwise would. Be careful what you fight for, Mr. and Mrs. America, you will probably get even more than you asked for.

I do have hope, however. Sooner or later, Americans will figure this out. At least they’re screaming about something now, which is a lot better than the docile slumber they’ve exhibited over the past several decades as we’ve marched toward oblivion. The government would much rather have them keep on sleeping than to have to divert their anger towards scapegoats and imaginary boogeymen. They will succeed in doing just that this time, but their system is nearing its end. The inevitable economic debacle will occur, and hopefully that will be the final straw. Americans have put their faith in government control and central planning of their lives for almost a century, and it has consistently let them down. Perhaps this last calamity will finally make them see the socialist lie for what it is. Then, they will finally stop walking down the road to serfdom.

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>Life in the Post-5/7 America

>We have spent the past seven years in a “post-9/11 world.” We started hearing this insidious slogan not long after the terrorist attacks occurred. To translate the slogan for anyone who has not realized what it means, it means this: Whatever was left of your personal liberty before the 9/11 attacks is no longer a privilege your government can afford to grant you (and make no mistake, your government considers liberty a privilege, not a right). It seems that personal liberty is something that was nice in the Old America, but is just impractical in a “post-9/11 world.”

Of course, the struggle for economic freedom was lost decades ago with the onset of public and corporate welfare, the abolition of the gold standard, and the emergence of the American Empire. However, as with the other “civil liberties,” some traces of the economic freedom of America’s former Republic have survived several decades into America’s post-WWII social democracy. Those last traces are about to disappear as well. The following is one way it could happen.

Why May 7th? There is no compelling reason for the exact day. However, it is the Thursday of the first full week after the next president’s first 100 days in office are completed. It may be just a coincidence, but cataclysms never seem to happen during those 100 days. Perhaps world market movers don’t do much until they get a feel for the new administration. Perhaps it is some kind of statist magic, left over from government sorcerers like Merlin or Morgan Le Fay. In any case, even the terrorists respected the first 100 days of George Bush’s administration before launching their attacks. So, I am going with the odds to say that the economic day of reckoning will not manifest itself until May 7, 2009 – the new “Black Thursday.”

Even if the American economy is already dead for all intents and purposes, an historic crash of the stock markets will officially signal the dawn of the new era. When it does, all pretense of the “possible moral hazard” accompanying massive government interventions into the marketplace will be dropped. We will be in a “post-5/7 economy,”[1] much like our “post-9/11 world,” and the last vestiges of your economic freedom will be lost, just as your personal liberty was lost after 9/11. Forgotten in debates regarding whether these interventions will be good or bad for “the economy” is the fact that each one amounts to stealing from someone – legal plunder because it is committed by government. Each new intervention, “unavoidable” because of the latest threat to the U.S./world economy, will cause three more problems for the government to solve with further interventions. Pointing out that the original problem was caused by a previous government intervention will be pointless. Free markets were a nice idea in the 20th century, but government control of the marketplace will be needed in a post-5/7 world.[2]

Despite the fact that government already treats the right to the fruits of your labor as a granted privilege, the small percentage Americans have been allowed to keep will seem relatively large compared to what they will be allowed after the big event. At that point, there will be a continual state of economic emergency that requires “Americans and Europeans to do more, not less,” as Barack Obama recently said in Berlin. There will be Housing in the New America and Universal Healthcare to be paid for, tens of millions of unemployed Americans to feed and clothe, and the “challenges of the 21st century (all created by government)” to meet.

Perhaps at that point it will occur to someone, somewhere, that none of this is necessary. Without the parasitic influence of a few thousand people, the other 300 million would naturally trade with each other to their mutual benefit, and would have little to fear from people thousands of miles away whom they would never think to bother themselves. It really is that easy. Americans can make a decision for freedom anytime they wish to, and rid themselves of the parasites once and for all. Hopefully, there will come a time when they will be easier to convince in the post-9/11, post-5/7 world.

[1] Whatever the actual date of the crash, simply insert it into the new government slogan and it works just as well.

[2] While it would be impossible in a Republic to enslave people with such nonsense as a market crash or a terrorist attack creating “a new world” where natural rights no longer exist, it is relatively easy in a Democracy, where only 51% of the people have to believe it for the scheme to work. This is just one reason why no politician refers to America as anything other than “a Democracy” anymore. Be suspicious of anyone who speaks likewise.

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