Happy 300th Birthday, Samuel Adams

Happy Birthday Samuel.
Great quote. I love the whole thing
“Contemplate the mangled bodies of your countrymen, and then say “what should be the reward of such sacrifices?” Bid us and our posterity bow the knee, supplicate the friendship and plough, and sow, and reap, to glut the avarice of the men who have let loose on us the dogs of war to riot in our blood and hunt us from the face of the earth? If ye love wealth better than liberty, the tranquility of servitude than the animated contest of freedom — go home from us in peace. We ask not your counsels or arms. Crouch down and lick the hands which feed you. May your chains sit lightly upon you, and may posterity forget that you were our countrymen!“

Fed Up with the Fed

The Federal Reserve (“the Fed”) began operations in 1914. Thus, many find it difficult to fathom an America without it. Yet as it conducts its own major framework review, everyone, including the Federal Reserve itself, knows that the Fed is unnecessary. Congress could abolish the institution and restore monetary matters to the free market. 

But should we end the Fed? In a word, yes. What would replace it? You! And me. And every other person, negotiating through markets, just like the Founders wanted.

The United States got along quite well without a central bank from 1837 until 1914. Before that, two old-style central banks, both called the Bank of the United States (BUS, often differentiated by calling them the First BUS [1791-1811] and Second BUS [1816-1836]), primarily served as the federal government’s bank. Both were privately owned in the sense that they were joint-stock corporations with shares that traded in securities markets, much like Switzerland’s central bank, the Swiss National Bank, today.

Strictly speaking, no central bank at all was needed until 1933 because before then the U.S. operated under a retail specie standard. In other words, the government defined the value of a U.S. dollar in terms of gold and/or silver. Americans held and traded specie freely, domestically and internationally. Legal entities (individuals, partnerships, corporations, governments) could hold physical silver and/or gold and/or non-legal tender claims (notes and deposits) on physical silver and gold issued by banks. 

When in operation, the BUS could, and at times did, exert some minimal influence on the money supply through the speed by which it redeemed the non-legal tender notes of commercial banks for specie or for its own non-legal tender notes. For the most part, however, market forces – that is, people negotiating with each other through markets rather than central bankers –  determined America’s domestic money supply and the level of interest rates. When increases in the domestic money supply increased domestic prices and lowered interest rates, gold and silver could “fetch” more abroad, leading to its export and hence a reduction in the domestic money supply. That decreased domestic prices and raised domestic interest rates, which eventually automatically reversed the money outflow. As foreign goods became more expensive relative to domestic ones, and as foreign interest rates became relatively less attractive, imports dropped while exports increased, leading to gold and silver inflows.

During wars and other periods of financial stress when banks stopped redeeming notes and deposits for specie, domestic prices could unmoor a bit more, but widespread expectations about returning to specie convertibility, combined with the freedom to quote prices based on the precise medium of exchange offered, tethered prices to specie. Despite several major wars and financial panics, the domestic price level reverted to the mean several times over the nineteenth century, leading to no net change in the price level over the century.

That is not to say that the pre-Fed system was perfect. There were booms and busts and some seasonal disturbances. The latter were more due to Civil War banking regulations than to market mechanisms, however, and private lenders of last resort minimized the costs of the former. 

Before the Fed, the BUS, a sort of regional private central bank called the Suffolk system, bank clearinghouses, the Treasury, and even individual investors served as lenders of last resort during America’s financial panics. Generally, emergency lenders followed a rule established by Alexander Hamilton now called Bagehot’s Rule. They lent freely, at a penalty rate, to all who could provide sufficient collateral. 

The Hamilton-Bagehot rule was superior to the modern Fed practice of flooding the markets with cheap money because it allowed insolvent firms to go bankrupt while supplying emergency loans to troubled but solvent companies. It thus stopped panic and financial contagion and also limited the reward-seeking, moral hazard behavior that occurs when individuals and organizations know that someone else will bear the downside risk of their gambles. The inducement for private parties is to earn a penalty rate on a loan likely to go bad only in a state of the world so ugly the loss will not matter, as Warren Buffett did during the 2008-9 crisis.

A specie standard works best when all or most major economies adopt it, which they may do once they realize that lenders of last resort can be private entities and that giving central bankers monetary policy discretion is too close to central planning to be relied upon for long-term price stability. The United States was essentially the last country to abandon the last vestige of the gold standard when President Nixon stopped converting dollars into gold for foreign central banks in the early 1970s, a move vociferously opposed by a financial journalist named Wilma Soss but by too few other Americans at the time. Due to its still dominant economic position, though, America remains the nation best positioned to lead the world back to a saner and safer monetary system.

In short, America could and should end the Fed and be no worse off for it and, instead, a lot better off.

Robert E. Wright is a Senior Faculty Fellow at the American Institute for Economic Research and the (co)author of 24 books, including Fearless: Wilma Soss and America’s Forgotten Investor Movement (All Seasons Press, 2022).

MAGA Comes to Italy

An Italian right-winger has won the race for prime minister in Italy; and in America, people hold out hope that a mostly RINO-driven Republican Party will somehow overcome Big Tech manipulation, indirect government censorship and massive election fraud in order to generate a “Red Wave.”

Here’s the problem. The answer does not reside in politics. It resides in people.

If the majority of people do not deserve, comprehend or appreciate freedom — they will not end up with freedom. In America, at best, a slight plurality is rational enough to appreciate some measure of freedom (perhaps 51 percent, nationally). That’s not enough. Add to that the fact the entire culture is rotten — rotten to the core, meaning: intellectually dishonest; totally disrespectful of individual rights; brazenly racist (anti-white, as badly as Jim Crow laws were brazenly anti-black); the list is endless. What I mean by “the culture”: The schools, most of the state and local governments, the entire federal bureaucracy, most of the courts (conservatives included) are either outright Communist/fascist/”woke” — or, worse yet, too cowardly to stand up to them. This is what I mean by a rotten culture — rotten to the core.

You can’t have a rotten-to-the-core culture and a plurality of people mostly uncomprehending of freedom (and therefore undeserving of it) and expect even the greatest candidate on earth (Ronald Reagan, Margaret Thatcher, Winston Churchill, Thomas Jefferson) to save them.

You cannot save bad, stupid or ignorant people from themselves. Only people can save themselves. And you can’t expect most people to save themselves in a culture where the schools, the media and the corporate elite are as rotten as they have become.

Does this mean it’s hopeless? Of course not. Man has free will. A sizable number of Americans ARE rational, freedom-loving, freedom-deserving and some of them more than ever before. That’s most of what informs the Trump/MAGA movement (which will go beyond Trump), not the nonexistant racism and fascism our rotten-to-the-core cultural leftists project onto that movement. Remember that most cultural transformations and revolutions happen at the behest of a minority — whether we’re talking about bad examples (the Nazis, the Communists, the Maoists) or the occasional great example (the American revolution).

It’s not hopeless. But it’s more daunting than I think most Trumpsters, conservatives, libertarians and other nonleftists recognize. Perhaps once they grasp how bad the situation is, we’ll see the greatest reawakening for rationality and liberty mankind has ever seen.

Here’s hoping.

Michael J. Hurd, Daily Dose of Reason

American and Chinese Communists Are Having it Both Ways

“My Son Hunter” star Laurence Fox slammed the Biden family in a recent interview on Steve Bannon’s popular “War Room” podcast, saying officials have so far failed to hold the first family accountable over Hunter Biden’s foreign influence peddling, which includes deals involving the Chinese Communist Party. [reported at Breitbart]

Well, of course. If you sympathize and agree with Communism, then — to you — it’s not a problem to make deals with the Chinese Communist Party. In fact, it makes you virtuous.

Communists in the 21st Century — American/European as well as Chinese — have figured out how to have it both ways.

By advocating Communism, they get to be in favor of the alleged supremacy of selflessless over individualism. We’re told — by literally everyone — that self-interest is automatically and always bad, while selflessness is automatically and always good.

They get to impose this creed of selflessness by imposing poverty and the death of liberty on 99 percent of their fellow citizens — while doing so in the name of virtue! And they get to live like billionaires in the process, because they are billionaires. Politically connected ones, at that.

In the past, this meant that Communists had to live in squalor, as they did in Soviet Russia and still do in places like Cuba and Venezuela. While the elites under Communism always lived better than the other 99 percent, these elites did not live like Zuckerberg, Gates, the Bidens, the Pelosis, or the elites of today’s Communist Party live. They were not billionaires.

Today’s Communists have really got quite a show going for themselves. They get to live really, really well — just like the elites of any totalitarian regime (from royalty on down) have always lived. But they get to claim the mantle of “moral superiority.” They do so not only through their advocacy of the redistribution of wealth, but through the supposed moral superiority of the Green movement.

They literally have it both ways. They get to live off the splendors that only capitalism could provide, while morally condemning capitalism — and condemning the other 99 percent to impoverishment.

The middle class is still vibrant in America, so it’s hard to see if you’re ignorant and torpid, as so many are. But the middle class is diminishing. The more left-wing the region of the country — California, New York, the big cities like Chicago/Seattle — the more you can see this. Because American Communists impose their will nationally, and aim to cement that totalitarian authority by hunting down and prosecuting all political opposition (e.g. Mar-a-Lago raid, Trump’s forthcoming criminal prosecution, the forthcoming criminalization of middle class Americans via 87,000 new armed IRS agents) … well, it’s easy to see how it all plays out. And how it all ends.

This does not end well, regardless. If millions of middle class Americans continue to roll over for what the 1 percent Communist elites — Zuckerberg, Gates, Soros, Biden, Pelosi, all the rest — are doing to them, then it’s obvious where it ends. The middle class dies out and everyone is either super-rich/super-connected … or disconnected and living a far less enjoyable, safe, healthy and prosperous life than most middle class Americans DID enjoy from the 1950s forward.

OR: People rise up and fight back. Yet with a weaponized and politicized DOJ, FBI, IRS, FCC, FEC, EPA, DEA and all the other agencies now firmly in position to act as America’s own KGB or Gestapo (or worse), well … it may not be too late to fight, but the war for freedom is pretty well along in its later stages, don’t you think?

Prove me wrong, America. So far, I’m not seeing a whimper of opposition — not real opposition — and it’s frankly disgraceful how easy it has been for these tryants, Biden crime family and all.

Michael J. Hurd, Daily Dose of Reason

Freedom of Speech is Dead — Not Just on Facebook, but in America

“We have freedom of speech, but you got to watch what you say.”

— Tracy Morgan

Most would unthinkingly, immediately agree.

But it’s dead WRONG.

Freedom of speech means precisely the opposite: NOT having to watch what you say.

It may be true that you must watch what you say IF you wish certain people to regard you in a certain way. If you desperately care about what everyone thinks of you, then it’s best to keep your mouth shut. If you care more about certain principles or ideas than about “other people,” then you speak accordingly.

But if you actually enjoy freedom of speech, you don’t have to worry about what you say — not for any other reason.

And that’s precisely what we no longer have in this country. Not on the Internet, not on social media, not in government-run schools nor in government-funded universities. Not in the government-run corporate fascist world.

Freedom of speech is dead.

Long live freedom of speech — the next time human beings attempt an experiment in a rights-based society.

Michael J. Hurd, Daily Dose of Reason