March 20, 2019

Progressives Should Target the Real Robber Barons

The political winds have shifted wildly over the past four years. After decisive defeats in both the 2006 and 2008 elections, the Republican Party’s prospects seemed dreary.  There was widespread talk of how the party needed to “remake itself.”  There was even speculation from some quarters that it would fade from influence permanently, as had its predecessors, the Whigs and Federalists. Certainly, the conservative movement needed a rallying point in order to regain a foothold upon public sentiment.

That rallying point was public aversion to the radically socialist agenda of Barack Obama and the Pelosi Congress. Regardless of whether the Republicans had any new ideas to offer, they were able to remake their image quickly by jumping aboard and partially co-opting the Tea Party phenomenon. Somehow, they have again established themselves in the minds of most Americans as the party of small government, free markets, and individual liberty, their consistent behavior while in power notwithstanding.

Now, it is the Democrats who find themselves on the wrong end of a one-sided mid-term election defeat, with more of the same looming over the 2012 presidential elections. As much as the 2008 elections were a repudiation of George W. Bush and all associated with his philosophy, 2012 will be a repudiation of Obama and all associated with his. If the modern “conservative” philosophy had been thoroughly discredited two years ago, the modern “liberal” philosophy has been annihilated this year. Nothing that Democrats won on in 2006 and 2008 is going to fly with voters right now. The left needs a rallying point that will resonate with voters and make them forget why they voted them out of office just two years earlier, just as those same voters forgot why they had voted the Republicans out merely two years before the 2010 mid-terms.

If they are not to completely abandon their image as champions of the poor, disadvantaged, and working class against the power of the wealthy elite, they must find a way to restore that perception in the minds of voters without associating themselves at all with socialism, which average Americans have quite obviously choked on and spit out over the past two years. They need their own avenue to tap into the Tea Party phenomenon, or a grass roots movement like it, and appear as the party fighting for the people against a federal government run amok. Their traditional anti-corporate, pro-welfare platform won’t work. For better or worse, Americans right now associate corporatism with the free market and aversion to welfare programs has never been more ascendant. However, there is a rallying point available to the left that is completely consistent with the modern progressive philosophy and which conservatives are completely ignoring.

The left’s political dominance during the 20th century all began with the early progressive movement, which was given its first life under Republican presidents Teddy Roosevelt and William Howard Taft. However, it was the “new freedom” promised by Woodrow Wilson which established and defined the progressive platform, subsequently advanced in great strides by FDR and Lyndon B. Johnson. A core tenet of this philosophy was the need to protect “the little guy” against the robber barons of capitalism – which the progressives successfully defined in the minds of voters as anyone of great wealth, whether they have achieved that wealth legitimately or not.

Indeed, the tragic aspect of the early progressive movement was that they lumped together all successful business people as plunderers and exploiters of the working class, thus discrediting free market capitalism along with the crony capitalism that was as rampant at the time as it is now. Along with corrupt railroad companies that soaked the people for corporate welfare, only to deliver shoddily constructed railroads that all went bankrupt, the early progressives also targeted companies whose success was due to superior products and lower prices, with their profits earned from consumers voluntarily choosing to buy their products.

John D. Rockerfeller’s Standard Oil was one such example. His company was dismantled by the government after more than two decades of offering the public higher quality oil at lower and lower prices. Instead of holding him up as an example of what a truly free market could achieve for the common man, the left attacked Rockerfeller as the definitive robber baron, regardless of facts to the contrary. With his company dismantled by the government, Rockerfeller abandoned the free market and became the robber baron he was wrongly accused of being. He decided to get into banking.

This is not to repeat the mistake of early progressives. All bankers in the 19th and early 20th century were not robber barons, nor is banking a de facto dishonest profession. Like any other business, it offers a service of great value to the public when that service is voluntarily purchased by consumers. When consumers choose to store their savings in a bank or allow the bank to invest their savings by loaning it out at interest, the banks that most conscientiously and wisely protect their depositors’ interests will prosper the most. Those that make good loan decisions will be able to pay higher interest rates to depositors and provide more stability. In a truly free market, they will win, because they benefit average Americans – the political base of the progressives – the most.

However, this is not the banking model that John D. Rockerfeller helped found in 1913. Rockerfeller was no longer interested in competing on a level playing field and relying on talent and hard work to make his fortune. He had already done that successfully and had been plundered by the government for his trouble.  He was not interested in being victimized again. This time, he would be the plunderer. Along with J.P. Morgan, Rockerfeller sent a delegation of men to Jekyll Island in 1913 to devise the mother of all robber baron schemes – the Federal Reserve System.

The Federal Reserve System is the most ingenious fraud in human history. It appeals to the right because it is seen as an institution of capitalism. It appeals to the left because it is seen as a regulator of the financial system that protects the little guy from the supposedly violent machinations of unregulated capitalism. In the meantime, it funnels trillions of dollars of plundered wealth to politically-connected corporations at the expense of average Americans and those corporations which still actually prosper because they offer superior benefits to the public.

Without getting into what really goes on behind the scenes at the Fed, let us consider what the Fed purports to try to do. Ninety-seven years of results notwithstanding, the Fed supposedly regulates the market by maintaining both full employment and price stability. The left supports this agenda because its constituency depends upon jobs and affordable consumer goods in order to survive. They never stop to think about how the Fed attempts to accomplish these goals.

The Fed attempts to maintain full employment through inflation. Inflation is properly defined as an increase in the supply of money and credit, not an increase in consumer prices (more on that in a moment). During periods when unemployment is higher and overall economic growth is lower, the Fed attempts to stimulate investment in new business ventures or expansion of existing ventures by “lowering interest rates.”

However, Mr. Bernanke cannot lower interest rates with a fiat command. Instead, the Fed manipulates the interest rate by buying large quantities of U.S. Treasury bonds from its member banks. This artificially increases the demand and lowers the supply of U.S. Treasuries. It also artificially increases the supply of money available to be lent in the market. With more money available to be lent, banks offer loans at lower rates than they would if money were in shorter supply. With lower rates, more businesses take out loans with which to expand or start new ventures. At the end of this chain of events, more average Americans supposedly get hired in order to support the new business activity that has been “stimulated” by the Fed’s monetary expansion.

Taking the Fed at its word, there is still a rub to this story. The magic described above and in the Fed’s press releases does not come without a cost. The money and credit infused into the economy during this process does not come from any “reserve” that is held by the public or by the privately-owned Federal Reserve. It is created out of thin air by the Fed, which enjoys this privilege as a result of legal tender laws and the Federal Reserve Act. By increasing the overall supply of dollars in the economy, this monetary inflation drives up the price of consumer goods.

It also causes capital to be misallocated, meaning that working people are hired for projects that are not ultimately going to succeed. This inevitably happens much more frequently when banks are able to loan “free money.” When they must convince depositors to invest their own money in loans the bank wishes to make, they are forced to make much wiser choices with that capital than when the money is simply created out of thin air and handed to them, with more fiat money forthcoming if they should make a mistake. In fact, a true understanding of the economics behind monetary inflation reveals that misallocation – economic booms and busts – are inevitable when monetary inflation is allowed to take place.

Progressives should automatically be suspicious of this whole charade simply because Wall Street loves it. Whenever the Fed makes an announcement that it will attempt to lower interest rates, the stock market immediately goes up. Of course it does. Cheap money hitting the market allows investors to get in on ground floor companies and pump up their stock value with newly-created money, subsequently bailing out long before the bust occurs. When the reality hits the market that half of these new companies had no viable business plan, the stock prices collapse and the ventures go out of business and lay off their employees. This is a recession. Average Americans are unemployed while the sharks who gobbled up the cheap money to pump and dump the stocks are sitting on a beach, enjoying the fruits of their heist.

Furthermore, while monetary inflation causes prices of consumer goods to rise for everyone, it is really average Americans and the poor who are most affected by it. When the price of gasoline rises to seven dollars per gallon, the Wall Street elite have lost purchasing power in terms of the dollars they hold, but they more than make up for it during the economic booms. Millionaires become billionaires, negating the effects of a further devalued money supply, while average Americans living paycheck-to-paycheck start looking for second jobs just to pay their rent and fill up their gas tanks to get to work.

However, the most compelling reason for progressives to oppose the Federal Reserve System is because of what it openly admits it represents. Taking the Fed and its supporters at their word, the Fed is nothing more than a subtler, more devious version of “trickle-down economics,” whereby large corporations receive huge sums of money in the hopes that they will then create jobs for the little guys. There is absolutely no difference between this argument and the “Reaganomics” of the 1980’s. Any self-respecting progressive who opposed Reaganomics must oppose the Federal Reserve System. If they are not strictly opposed to government redistribution of wealth, they certainly are opposed to redistributing from the middle class and poor to Wall Street. That was the whole principle upon which the movement was founded.

There is no reason that the left should concede the Tea Party movement to conservatives. It is not fundamentally a Republican phenomenon. It is just that the Republicans are the only party that has been able to adapt their rhetoric to what the Tea Party demands to hear. The Tea Party is rediscovering America’s founding principles. However, their perceptions are being skewed toward the conservative founding philosophy that advocated corporate welfare, a large military establishment, and a central bank to provide the necessary capital – plundered from average Americans. They quote Jefferson but are deceived into supporting policies consistent with his political arch-enemy, Hamilton. They need to hear from the left on what they are missing, instead of being vilified by the left as kooks.

The true American philosophy of free enterprise as expressed by the liberal Jefferson was completely opposed to the central bank of the time, recognizing it as incompatible with the free market and wholly a vehicle for big business to plunder the people. These ideas have been dead and buried for an entire century while the Fed has been allowed to wreak its havoc with impunity. They are ripe for rebirth within the Tea Party, which would embrace Jefferson’s ideas about the dangers of central banking as readily as they do his warnings about big government. There is a strong populist undercurrent in the Tea Party. Progressives are ignoring it at their peril.

Never in its existence has the Fed been under such scrutiny in the media as it is now, nor the subject of so much public opposition. It is a grassroots fire smoldering beneath the surface, waiting for someone to strike a match. To liberals and progressives everywhere, don’t let the conservatives snatch this opportunity out from under your noses. Take up your fight against the real robber barons – the Federal Reserve System and all of its beneficiaries.

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 2010

>The Crusade Against Greed: Government’s Scapegoat

>Despite the fact that this economic crisis is unfolding exactly the way that the Austrian economists predicted it would, along with the impending police state that Hayek predicted over 60 years ago, the American people show absolutely no sign of figuring out the CAUSE of this crisis. The most discouraging aspect of the whole debacle is the propensity of the American people to take the government bait by blaming this financial and economic collapse on “greed.” This plays right into the government’s hands.

As platitudes go, those warning against greed are the ones that people should be most suspicious of. Anyone that seems overly interested in making you feel guilty about accumulating too much property probably has an interest in acquiring what you leave behind. If nothing else, the fact that both Republicans and Democrats are vilifying greed should make people think twice about whether they may be burning the wrong witch when they seek to blame greed for our present troubles.

Webster’s defines greed as “a selfish and excessive desire for more of something (as money) than is needed.”[1] Any student of economics should be suspicious of this vice. While “selfish and excessive” certainly conjures up distasteful emotions, those are little more than prejudicial adjectives accompanying the real substance of the definition: desire for more of something than is needed. Does this mean that anyone with a savings account is greedy?

While one could counter that some savings are actually “needed,” a moment’s reflection should have one questioning what the real motivation for vilifying greed might be. Who do we find denouncing greed the most vehemently? The rich and powerful. Does this bother anyone besides me?

Let me be clear. Greed had nothing to do with causing this financial crisis, no matter how many times you are told that it did by the media and politicians looking for votes. In economics, the goal of every market participant is to acquire “more than is needed.” If the truth be told, acquiring more than is needed is what Jefferson really meant when he talked about the “Pursuit of Happiness.” Property – the fruits of your labor – is the means by which you sustain your existence and provide opportunity for intellectual and spiritual enrichment. Those who must work every waking hour just to provide the basic necessities of life have time for neither quiet meditation nor for reading Dostoevsky. By acquiring more than you need, you create leisure time to pursue your other interests and enable yourself to provide for your children or to give to charity. In this life on earth, acquiring more than you need is the means to happiness and security for yourself and those that you love. It is also your unalienable right, as our founders repeatedly told us.

The whole point of participating in a free market is to acquire as much property as you possibly can. Not only is there nothing wrong with this, it is actually vital to the health of the market. With every participant acting in their rational self interest to maximize their wealth, the minds of all participants are leveraged and society as a whole reaps enormous benefits.

One of the key mistakes that critics of free market capitalism make is failing to understand that there is only one way to acquire great value in that system: to offer great value in return. Listening to the proponents of socialism, one might be led to believe that one can only gain at another’s expense. This is not true. In a laissez faire capitalist system, economic agents trade to their mutual benefit. Every exchange is perceived by both parties to be an EQUAL exchange, or it does not occur. That is the nature of VOLUNTARY exchange. No one deliberately causes themselves harm. While they may not always trade wisely, more often than not they do, and in every case they make an exchange that they believe is in their best interests. One can only consume great wealth by producing great wealth.[2]

Thus, it should be clear that there is no such thing as acquiring “too much” in a free market. Only by supplying enormous value can any economic agent acquire enormous value. Acquiring property in a voluntary trade by offering equal value in return is the essence of “earning.” In a free market, all transactions are voluntary. Therefore, all wealth must be earned.

A second reason for wrongly perceiving a threat from greed in a free market is the failure to acknowledge the role played by risk. There is always some amount of wealth that can be acquired with very little risk. However, in order to achieve greater amounts of wealth, economic agents must accept greater amounts of risk. Risk acts as a counterbalance to what is commonly referred to as greed. If an economic agent seeks to acquire value far beyond the value he is offering in return, he can only do so by taking inordinate risk, and will virtually always fail. While the attempt to acquire value with this type of speculation might not be admirable, others certainly have no right to forcefully stop him from doing so. The risk is his, as are the gains or losses he realizes as a result. In a free market, there is no moral or economic justification for attacking “the speculator.”

That brings us to our present crisis and its real cause. It was not greed – the desire to accumulate more than one needs – that caused the crisis. What caused the crisis was government removing the risk of lending to sub-prime borrowers by guaranteeing mortgages through Fannie Mae and Freddie Mac. With no fear of losing their investment, lenders had no reason not to take inordinate risk in lending to sub-prime borrowers. In fact, Fannie Mae CEO Daniel Mudd told the New York Times that he was actually pressured by the government to continue increasing the risk that Fannie was exposed to. According to Times reporter Charles Duhigg,

“Capitol Hill bore down on Mr. Mudd as well. The same year he took the top position, regulators sharply increased Fannie’s affordable-housing goals. Democratic lawmakers demanded that the company buy more loans that had been made to low-income and minority homebuyers.”[3]

Whatever the true intentions behind creating these government-sponsored enterprises (GSE’s), they violated moral and economic law with predictable – and predicted – results. This intervention into the market and suspension of market forces was the direct cause of the sub-prime crisis, not greed.

This was more than just a bone-headed mistake by government. It was a crime. Governments are instituted to secure individual rights, including property rights. Instead of protecting the property of its citizens, government stole it to guaranty sub-prime loans. Now that its ill-advised program has failed, government is looking for a scapegoat. Enter “the greedy financier,” and the real culprit walks.

None of this is meant to absolve the lenders, who knowingly made loans to people who could not pay them back. However, the guilt should be shared equally between the lenders, the borrowers, and the government. It was not greed that they were guilty of, it was stealing. They stole money from the taxpayers to make the loans possible. All three parties benefitted by passing risk onto taxpayers without their consent. The problem was not the desire for too much wealth. It was the desire for wealth that they did not earn.

This is an important distinction, because we will soon be subject to a government “solution” to this supposed problem of excessive greed. Blaming greed for the crisis plays right into the government’s hands, as it allows government to respond with measures that will limit the amount of money that can be earned, even legitimately. Already we are hearing calls for more regulation. This amounts to a further violation of our rights and will continue the destruction of our markets. On the other hand, if we recognize the true cause of the crisis, we can demand less regulation and an end to government intervention into the marketplace, which is what our markets actually need. One cannot prescribe the medicine until one has accurately diagnosed the disease. Don’t let the government off the hook by buying into their crusade against greed. Instead of free markets, let’s punish the truly guilty for once.

[1] http://www.merriam-webster.com/dictionary/greed
[2] It should be noted that this applies to truly free markets. In the U.S. mixed economy, government privilege allows some to accumulate great wealth because of that privilege, rather than any great value they offer the marketplace in return. Of course, the solution to this is to eliminate government privilege, not restrict the market further.
[3] Duhigg, Charles “The Reckoning: Pressured to Take More Risk, Fannie Reached Tipping Point” The New York Times Oct. 4, 2008 http://www.nytimes.com/2008/10/05/business/05fannie.html?pagewanted=1&sq=mudd&st=cse&scp=1

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>I Want a New Name

>Call it a midlife crisis, but I can tolerate the label “conservative” no longer. Can there possibly be a name that makes a person sound more boring? Certainly this is the work of our adversaries, in an attempt to make our ideas sound old, outdated, and irrelevant. When I hear the word “conservative,” I think of an old guy in a smoking jacket, having a scotch at “the club.” Now, I have nothing against a good single malt, but as for the rest, well…

I’m not sure how this happened. How did the people that are in favor of maximum liberty become “conservative?” How did the people that are in favor of maximum government become “liberal?”

It wasn’t always this way. Most Americans in 2008 don’t remember this, but it was not that long ago that the term “liberal” meant exactly the opposite of what it does today. Locke, Rousseau, and Hume are all considered fathers of the modern “liberal tradition.” Their work directly inspired our founding fathers, who were liberals one and all. As late as the 1940’s, F.A. Hayek was still referring to the concepts of laissez faire capitalism and individual liberty as “liberal.” Even today, Merriam-Webster’s Dictionary defines liberalism as,

“b: a theory in economics emphasizing individual freedom from restraint and usually based on free competition, the self-regulating market, and the gold standard c: a political philosophy based on belief in progress, the essential goodness of the human race, and the autonomy of the individual and standing for the protection of political and civil liberties”[1]

If that is what liberalism is, one only need look at the campaign platforms of Barack Obama and Ron Paul to see that we have become terribly confused. Somehow, less freedom has become “liberal” and more freedom has become “conservative.” What kind of Orwellian doublespeak is this? What’s next, “War is Peace, Freedom is Slavery, and Ignorance is Strength?”[2]

Actually, over sixty years ago, Hayek warned us about the redefining of important words,

“The most effective way of making people accept the validity of the values they are to serve is to persuade them that they are really the same as those which they, or at least the best among them, have always held, but which were not properly understood or recognized before. The people are made to transfer their allegiance from the old gods to the new under the pretence that the new gods really are what their sound instinct had always told them but what before they had only dimly seen. And the most efficient technique to this end is to use the old words but change their meaning.”[3]

Wow. That explains why every time I hear people say the word “liberal” in relation to politics, I feel like Inigo Montoya from The Princess Bride. I want to say, “You keep on using that word – I do not think it means what you think it means.”

It’s time to start beating the pro-tyranny crowd at their own game. First, they changed the meaning of the word “liberal” to mean exactly the opposite of what it used to mean. The “classical liberals” became modern conservatives. If that weren’t bad enough, “conservative” has now been redefined as well. If you haven’t noticed, it doesn’t mean less government and more freedom anymore. We now have “neo-conservatives” that like big government just fine – complete with huge gains in entitlement spending, unnecessary warfare, corporate bailouts, and unmasked socialism. Neither “liberal” nor “conservative” have any liberty left in them. We need a new name.

I suggest that the freedom movement wage a little linguistic warfare itself. From now on, let us call ourselves “neo-liberals.” I know. Half of the people reading this just spit their cheerios all over their computer monitors. Lew Rockwell is organizing a posse. Even mild-mannered Ron Paul is warming up his left jab, unused along with his wrestling moves since 1952. I have to admit, the first time I said it, I had an attack of the heebie jeebies myself. However, it is not even a matter that “a rose by any other name would smell as sweet.”[4] It really is OUR name. It was simply stolen from us, like Charles Manson stole that song from the Beatles. Now, we’re stealing it back.

There is no reason why this couldn’t work. If we’ve learned anything, we’ve learned that if you say something over and over enough times, no matter how ridiculous it might be, you can get the majority of people to start believing it. This idea isn’t a bit ridiculous. We have to come to terms with the fact that, whatever we think conservatism means, the rest of America has moved on with the new “neo-conservative” definition. Conservative now means pre-emptive war, police-state security policies, record government spending, and corporate socialism. Liberal now means the politics of envy, higher taxes, record government spending, and democratic socialism. Liberty needs a new word, a word people under seventy can live with.

Neo-liberals. See? You’re getting used to it already.

Tom Mullen

[1] http://www.merriam-webster.com/dictionary/liberalism (the first definition is omitted as it appliesto the word as defined when used in a religious context).
[2] Orwell, George 1984 © 1990 Penguin Books
[3] Hayek, F.A. The Road to Serfdom Routledge Classics 270 Madison Ave. New York, NY 10016 Pg. 161
[4] Romeo and Juliet (II, ii, 1-2)

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