January 17, 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

>China Saying Goodbye to US Market

>I am not sure if this announcement will receive the attention it deserves, but it is probably the most significant piece of news of this entire turbulent month. China today announced that it will “seek to expand its massive internal market to counter the global economic slowdown that has reduced international demand for Chinese goods.”As reported by Associated Press writer Gillian Wong, China has decided to shift the focus of its economic planning away from exports and toward domestic consumption. This is the beginning of the end for the U.S. dollar and what is left of the U.S. economy.

Fans of Peter Schiff (and I am certainly one of them) are familiar with the central tenet of his thesis: that it is a misconception to believe that China is dependent on U.S. consumption to fuel their export economy. For years, Schiff has been arguing, with few in the mainstream media agreeing, that China would be better off without the U.S. According to Schiff, they would simply consume their own products instead of sending them to America in exchange for increasingly worthless U.S. dollars. In fact, China has suffered its own inflation as a result of pegging its currency to the U.S. dollar. If they unpegged their currency, it would naturally float to its true value on the open market, making it much stronger and the U.S. dollar much weaker. This seems to be what they have finally decided to do.

The official release from the Xinhua News Agency goes on to say, “We should step up efforts to boost domestic demand, particularly domestic consumption, and keep the economy, the financial sector and the capital market stable.”

It is important to remember the definition of demand. Demand is not only the desire for goods or services, but also the purchasing power necessary to acquire them. There is certainly never a shortage of desire for goods and services anywhere. The Chinese people haven’t failed to buy their own products because they didn’t want them. They have failed to buy them because they did not have the purchasing power they needed to buy them. Now, the Chinese government is saying that they are going to try to give them that purchasing power.

However, the Chinese government is also saying that they wish to maintain stability in their financial and capital markets. This means that they must avoid what has been the U.S. method of boosting consumption, namely pumping cheap money and credit into the economy, compliments of the Federal Reserve. However, without new money, what will give the Chinese people more purchasing power?

The answer, obviously, is an increase in the purchasing power of the money that they already have. This will be the inevitable result of unpegging the strong Chinese Renminbi Yuan from the weak U.S. dollar. The Yuan will quickly float to its natural high value, allowing the Chinese people to purchase themselves those products that they used to export to the U.S. This will also mean that U.S. consumers will have to either do without those products, or pay the much higher prices of their counterparts that are made in the U.S. The higher prices of U.S. made products may go even higher due to the decreased overall supply, depending upon how that decreased supply balances against decreased U.S. demand (purchasing power).

However it plays out, it will mean a huge shift in standard of living, with the Chinese enjoying a higher standard, while the U.S. suffers probably the biggest decrease in standard of living in its history.

Make no mistake. The Chinese will have to suffer through an adjustment period as their export economy reallocates resources to sell their products domestically. Their equity markets have reflected this, both over the past year and during the recent crash. However, once the markets bottom and the Chinese complete the adjustment period to a domestic consumption model, Chinese equities will skyrocket as their economy realizes unprecedented growth, this time on much more solid footing as they sell their products to their own citizens in exchange for a currency with REAL purchasing power. As Jim Rogers has said since he moved to Singapore last year, “Moving to Asia in 2007 will be like moving to New York in 1907 or to London in 1807.”

A paragraph near the end of the article aptly reflects the opposite directions that China and the United States are heading in.

“State media reports ahead of the meeting said the committee would review an amendment to give 750 million rural dwellers more freedom to lease or transfer their land, but the final statement did not mention the issue.”

One country is moving toward less regulation and freer markets, and has the most prosperous century in its history ahead of it. The other is moving toward more regulation and increasing government control. For the former, the explosion in prosperity will eventually result in a political revolution that will transform it into the free society it deserves to be. For the latter, only a reawakening of liberty can save it from the fate of all great republics that devolved into empire.

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