The Collectivist Mind Game, Part 1

Demonizing the Non-Compliant

By Oleg Atbashian

In the libertarian sci-fi classic, "The Moon Is a Harsh Mistress," Robert A. Heinlein describes a successful revolution of the individualistic, free-market-oriented residents of the Moon against the Earth's tyrannical big government.  The ins and outs of agitating and organizing the masses to fight the oppressive Authority feel just as realistic as the finer points of everyday life in the underground Lunar cities of the future.

The proposed revolutionary scenario could even serve as a workable model for similar real-life endeavors, if only the renowned futurist author hadn't neglected to factor in the immanent function of any oppressive regime: systemic brainwashing of its subjects through the media, education, and entertainment channels.

If the tyrants on Earth were worth their salt, all the freedom-loving colonists would be subjected to an intense, manipulative indoctrination, which would shape their self-image as small and sinful "little guys" vis-à-vis  the powerful, virtuous government that serves the powerless and protects them against all enemies, including themselves.

Thus, the government's propagandistic narrative would establish the illusion of a society divided into three major classes: the ruling government class, endowed with benevolent powers to guide or punish; the majority class of hapless losers, whose survival depended on the government's largesse and protection; and an unquantifiable class of demonized mysterious enemies of the government and, by extension, of the people, who would be the perceived culprits of all failures, hardships, and misery of the little guys' everyday existence.

Hidden Pleasures

Paul Ehrlich’s False Gospel

by Theodore Dalrymple

John Maddox (1925 – 2009) was for many years the editor ofNature, one of the two most important general science journals in the world. In 1972 he published a broadside against the radical pessimism then very prevalent with the title The Doomsday Syndrome: An Assault on Pessimism. In this book, which makes interesting reading today, Maddox attacked the propensity of scientists such as Paul Ehrlich and Barry Commoner to project current trends indefinitely into the future and to conclude therefrom that catastrophe must sooner or later (usually sooner) result.

Ehrlich – who is still predicting catastrophe with as much confidence as if all that he had predicted for the recent past had actually come to pass – famously, or infamously, asserted in his neo-Malthusian book, The Population Bomb, published in 1968, that the battle to feed mankind was over and that hundreds of millions of people would inevitably starve to death in the 1970s, irrespective of what anyone did to try to avoid it.

His prediction was not borne out; forty years later the greatest nutritional problem in the world is probably obesity caused by over-eating. But like those persons on the fringe of religion who predict that the world will beyond peradventure end on a certain date but whose faith is quite unshaken by the failure of that wicked world to conform to their righteous prophecies, so Professor Ehrlich continues to assert that really he was right all along: merely that he mistook the date of the great reckoning.

The problem with an open-ended prediction, or rather prophecy, is that it can never be proved wrong, however long it fails to be borne out. To the argument that the prophet’s direst prognostications have not come to pass, he can always return the answer, ‘No, not yet.’

Why Do Economists Urge College, But Not Marriage?

Both are good for you. Only one is viewed as a proper aim of society

by Megan McArdle

College improves your earning prospects.  So does marriage.  Education makes you more likely to live longer.  So does marriage.  Yet while many economist vocally support initiatives to move more people into college, very few of them vocally favor initiatives to get more people married.  Why is that, asks Pascal-Emmanuel Gobry? His answer:

Meanwhile, economists’ “cosmopolitan perspective” (as Cowen puts it) makes them not feel good at the idea of public policy that would interfere with personal choices (allowing for a second that getting married is a “personal choice” in a way that going to college isn’t). Most economists think that government should not interfere or have a stance one way or another with decisions that feel intimate to people. That is a complete value judgement. And it’s a completely defensible one.

But at the level of the economics profession, this leads to bias: much more ink is spilled on, and thought given to the college wage premium than the marriage wage premium. One is mostly praised and interpreted in a certain way, while the other is mostly ignored. And, of course, the thing that academic economics focuses on has an effect on elite debate and public policy, especially when the socially liberal, pro-higher ed biases of economists line up well with those of the rest of the elite.

Bryan Caplan has more thoughts.

I can come up with stories as to why this might be the case.  We might think it's easier to get college professors to teach useful classes than it is to get spouses to treat each other well. (I'm not sure how much evidence we have that this is true, but it's not unreasonable.)  

We might not want to make people who fail to marry feel bad, since many of them probably feel pretty bad about it already.  

Birth of the Nation

How this surprising political form became the framework of Western civilization

By Pierre Manent

The motor of human history turns on the question of political form. In the ancient world, two such forms prevailed: the city-state and the empire. Indeed, the history of the ancient world is essentially the history of the interplay of these two forms, whether through war (as in the Greek cities’ war against the Persian Empire) or through a city’s becoming an empire. Athens was an imperialistic city, but it didn’t succeed in becoming—or at least in maintaining—an empire. It was Alexander, who came from the periphery of the Greek world, who established the Greek empire. From then on, an imperial Greek space existed that was soon occupied by a newcomer: Rome, which made the almost unbelievable effort of transforming itself from a little city into a world empire (see “City, Empire, Church, Nation,” Summer 2012).

These are elementary historical facts, and yet, on close inspection, they reveal a remarkable intelligibility. The city is the smallest human association capable of self-government, while the empire is the most extensive possible grouping under a single sovereign. Thus we have two conceptions of humanity, two ways of crystallizing the fact of being human. Not only might we say that the ancient order was based on these two great political forms and their interrelations; we might add that this ancient order was the “natural” order of human things, as both forms developed spontaneously, without any previous idea or conception—unlike the modern state.

The persistence of empire in European history after the fall of Rome is striking: the Holy Roman Empire, the French Empire, the German Empire, and now the European Union, which some call an empire. Yet empires didn’t determine the form of Europe. Nor was European life organized mainly in city-states, though the city saw some remarkable developments in such places as Italy, Flanders, and the Rhineland. Why did Europe gradually abandon the two natural forms of human association? And why did a third form, for which there was no equivalent in the ancient world, finally prevail?

Why Democracies Will Always Go Bankrupt

Bankruptcy is the inevitable, inexorable end

By Gonzalo Lira

When I was growing up, finance was mother’s milk to me, especially as I was a bit of a math geek. But for my formal education, I was trained—rather rigorously, and in spite of my laziness—as a philosopher and a historian. This odd combination is why I have such a jaundiced view of economics: I don’t find economics particularly intimidating, or even particularly challenging—it’s just finance’s snooty but poor (and slightly daft) older cousin. History’s surprisingly ignorant and blinkered accountant. Philosophy and Math’s lightly retarded, Puritanically rigid, and altogether rather embarrassing spawn.

Now, it’s all good and fine for me to rant about how useless economics is—but these aren’t empty complaints on my part: I can point to a single, specific, monumental failing of economics—a failure in the discipline which pretty much proves my point:

The United States is going bankrupt—and economics cannot explain why.

In fact, a surprisingly large number of economists choose to ignore the problem of America’s looming bankruptcy altogether; or claim there is something called a “structural deficit” (a highfalutin way of pretending that it cannot be fixed, and therefore doesn’t need fixing); or else—as is the case of the fools backing Modern Monetary Theory—they make the claim that all deficits are just debts the government owes itself, so therefore the American government cannot go broke, so therefore—and let’s ring out the QED—the fiscal over-indebtedness is actually not a problem because it doesn’t even actually exist! 

They really do claim that. And no, they are not high.

Of course, sovereign over-indebtedness does exist, and it is a problem—a terrible, life-or-death problem: As a lot of historians have pointed out, sovereign bankruptcy presages and ushers the collapse of great nations—often violent collapse. And this is something we want to avoid, no? 

Some schools of economic thought recognize that deficits are bad because they lead to bankruptcy, and that therefore fiscal budgets should be balanced so as to avoid them. But they do not explain why this is the case—they have no argument to explain why deficits happen in the first place. That these clever Austrians point to something that has happened before, and therefore infer that it will happen again if similar conditions are met is not an argument—it is an observation, like saying that the sun has risen countless times in the east, so it will likely rise again in the east tomorrow morning.

The Frivolity of Evil

Crying in the wilderness

by Theodore Dalrymple

When prisoners are released from prison, they often say that they have paid their debt to society. This is absurd, of course: crime is not a matter of double-entry bookkeeping. You cannot pay a debt by having caused even greater expense, nor can you pay in advance for a bank robbery by offering to serve a prison sentence before you commit it. Perhaps, metaphorically speaking, the slate is wiped clean once a prisoner is released from prison, but the debt is not paid off.

It would be just as absurd for me to say, on my imminent retirement after 14 years of my hospital and prison work, that I have paid my debt to society. I had the choice to do something more pleasing if I had wished, and I was paid, if not munificently, at least adequately. I chose the disagreeable neighborhood in which I practiced because, medically speaking, the poor are more interesting, at least to me, than the rich: their pathology is more florid, their need for attention greater. Their dilemmas, if cruder, seem to me more compelling, nearer to the fundamentals of human existence. No doubt I also felt my services would be more valuable there: in other words, that I had some kind of duty to perform. Perhaps for that reason, like the prisoner on his release, I feel I have paid my debt to society. Certainly, the work has taken a toll on me, and it is time to do something else. Someone else can do battle with the metastasizing social pathology of Great Britain, while I lead a life aesthetically more pleasing to me.

My work has caused me to become perhaps unhealthily preoccupied with the problem of evil. Why do people commit evil? What conditions allow it to flourish? How is it best prevented and, when necessary, suppressed? Each time I listen to a patient recounting the cruelty to which he or she has been subjected, or has committed (and I have listened to several such patients every day for 14 years), these questions revolve endlessly in my mind.

No doubt my previous experiences fostered my preoccupation with this problem. My mother was a refugee from Nazi Germany, and though she spoke very little of her life before she came to Britain, the mere fact that there was much of which she did not speak gave evil a ghostly presence in our household.

Later, I spent several years touring the world, often in places where atrocity had recently been, or still was being, committed. In Central America, I witnessed civil war fought between guerrilla groups intent on imposing totalitarian tyranny on their societies, opposed by armies that didn't scruple to resort to massacre. In Equatorial Guinea, the current dictator was the nephew and henchman of the last dictator, who had killed or driven into exile a third of the population, executing every last person who wore glasses or possessed a page of printed matter for being a disaffected or potentially disaffected intellectual. In Liberia, I visited a church in which more than 600 people had taken refuge and been slaughtered, possibly by the president himself (soon to be videotaped being tortured to death). The outlines of the bodies were still visible on the dried blood on the floor, and the long mound of the mass grave began only a few yards from the entrance. In North Korea I saw the acme of tyranny, millions of people in terrorized, abject obeisance to a personality cult whose object, the Great Leader Kim Il Sung, made the Sun King look like the personification of modesty.

The phase that launched a thousand bubbles

The Dysfunction Trilogy Part C

Bubbles last just as long as it takes for technical to become fundamentals. 

By Chan Akya

Helen of Troy had the face that launched a thousand ships while Federal Reserve chairman Ben Bernanke and his compatriots have presided since 2007 over the economic phase that launched a thousand bubbles. 

In the previous two parts of this trilogy, the focus was on real-world businesses and pension planning that have been adversely affected by monetary policies over the past few years and particularly since 2009. 

Have these efforts at quantitative easing produced any tangible (positive) economic results at all - not that anyone would notice really. Key figures such as retail sales and capital investments still vastly lag levels seen before the crisis; and even the figures that look like improvements don't quite stack up when you look closer. 

For example, US non-farm payrolls for April showed an increase of 165,000 jobs against market expectations of 150,000 jobs for the period. However, once the average work hours were taken into account, payrolls were actually down - the quantum has been estimated from 300,000 to 500,000 based on the measure. 

What about the other major focus of Keynesian measures namely to propel inflation in Group of Seven economies with a view to increasing consumption and investment while cutting real debt burdens? Well, that hasn't panned out yet either. 

There is no inflation - at least in the way that it is popularly measured, nor have yields on Treasury Inflation-Protected Securities (TIPS) moved in any fashion that would suggest sticky, higher prices. This is because the fear of lower real returns and increased government debt (as suggested in the previous two articles) have pushed people to cut consumption even further and instead attempt to save money even if that means going for speculative investments. This is covered in the next section. 

Bubbles galore

So if the intended consequences of the Keynesian stimuli haven't panned out as per plan, what about the unintended consequences? Typically, when central banks fail in their policies, one would expect to see the following:

a. Asset bubbles

b. Rising systemic risk

Random correlations 

On the subject of asset bubbles, we don't have much to complain about with, at a minimum, stocks and real estate around the world moving sharply higher without any basic support from fundamentals. In the rest of the article, some details about the asset bubbles will follow. 

The issue of systemic risk is germane to any consideration of how central bank policies have panned out. With organic growth proving elusive even as intervention helped to obviate the need for taking significant balance sheet hits, banks as well as the shadow banking sector have plunged headlong into funding of highly risky transactions, be it US sub-prime mortgages (remember those? Apparently caused some crisis in our history) or highly leveraged investment mechanisms such as collateralized debt obligations and collateralized loan obligations (remember those?). 

Banks are once again at the forefront of risky investment strategies. Capital levels haven't risen to the extent required for the scale of assets in the pipeline, while falling margins have disallowed banks from recuperating their reserves. 

A key highlight of financial crises tends to be the emergence of random correlations - random in this case referring not so much to financial history but overall investment logic; but this also goes into the heart of rising systemic risk being mentioned above.

Bernanke stole your pension

The Dysfunction Trilogy Part B

By Chan Akya  

A core aspect of the logic of folk who support stimulus programs in the name of John Maynard Keynes is that government spending to offset private sector contraction remains a victimless crime. This is completely untrue, and understanding the actual costs of Keynesian machinations by studying real-world examples of dysfunction is important to unravel this pernicious logic. 

In the first part of this series, we considered the impact of random intervention in the shipping sector, in particular the role it has played to crush profits and imperil employment in the sector globally. 

In the second part of this series, we will look at conditions in the area of retirement planning and returns. The notion of stealthy wealth transfers is part of a longer debate that goes into the core aspects of the financial crisis; to a large extent many of the issues have been raised previously in these pages but perhaps more in passing than as the core focus. 

The core function of financial markets is to connect pools of savings with the people who need money for their immediate future. In demographic terms, this can be expressed as markets being the intermediary between older people with savings and young people who need to borrow to set up house, buy cars and other utilitarian requirements. 

Construct of pensions - a quick primer

This a quick primer, and not all the nuances are or even can be covered in such a short summary. First let's quickly recap the theory here, even if parts of it will appear unrealistic to many readers who have been hardened with real-world experiences over the past few years. 

The rate of return for these old people is meant to take into account two primary factors: the cost of money and the risks entailed. The cost of money is measured by one of two factors - either as the minimum rate of return on money that keeps its purchasing power constant; or as a cumulative measure of opportunity lost by renting it out without risk. 

Typically these two rates are close to the same, or in other words, returns on local government bonds are meant to offset the loss of purchasing power while preserving the principal. Instead of local government bonds, one could consider bank deposits as a suitable alternative. 

Real world impact: if you consider the historical depreciation in the value of money - purchasing power - across the Group of Seven nations, and the needs of a comfortable existence in future, then a realistic return rate on pension portfolios would range between 5% and 10%. Remember also that this rate needs to account for capital withdrawal once people actually retire. Once we remove the periods of overly high inflation as well as stagnation or deflation (that would be you, Japan) the base (minimum) rate works out to 6%. This is the realistic minimum rate that needs to be achieved on pension portfolios, but one could also consider it a weighted average of returns before people actually retire. 

Keynes stole your ship

Dysfunction Trilogy Part A

By Chan Akya

Despite mounting evidence of the dysfunction being caused by Keynesian policies, rhetoric in Europe and the United States is overwhelmingly turned against austerity. Over three articles, the author will examine specific examples of the dysfunction that has been caused by such government intervention, and the very real economic pain being caused as a result with the objective of dispelling the dangerous notion that higher government spending is a victimless crime.

Here is a quick quiz: name a global industry that is as old as antiquity, employs millions of people, withstood and indeed thrived with technological change but perhaps most importantly of all with diverse supply and demand dynamics is an industry that has never been cornered by any particular group for very long in history. 

If you thought the reference above was about shipping, well done. In contrast if you thought it was about prostitution, well then, time for a cold shower. 

The typical cycle of shipping is as old as history and has always been about two contrasting and virtually uncorrelated forces: firstly the interaction of operations with risk, and secondly the boom-bust cycle. Western readers will remember learning about the exploits of sea-faring Greeks and other Mediterranean peoples as merchants far and wide seeking to profit from trade with other countries. This continued into the times of Shakespeare (examples include the Merchant of Venice and settled into modern times as shipping became the moving force of global economies post World War II. The advent of standardized containers during the Korean War and thereafter proved a boon for global trade, and with it, improved the economic fortunes of all countries involved.

For these 70 years or so of modern shipping, at least five boom-bust cycles were visible as the effects of the cold war, the oil crisis, the emerging-market crisis in the '80s, Scandinavia's sovereign debt crisis in the '90s, and the decline in the industry in the first few years of this millennium. 

The Simplicity of Sound Money

Almost Everybody Can Understand It

by Patrick Barron

Understanding today’s convoluted domestic and international fiat monetary system frankly requires a great deal of time and study. One must understand fractional reserve banking, and the way this system affects the money supply. One must understand the multi-step process by which banks create money out of thin air.

One must understand central bank open market operations. Internationally, one must try to understand floating exchange rates, how they are manipulated by central banks, and the resulting impact on national economies. For example, is it best for a country to drive down its exchange rate in relation to other currencies or do the opposite?

These issues are never understood by policymakers, who appear to be among the most illiterate in economic matters, so monetary policy swings to-and-fro according to which economic group has temporary control over the levers of the government, and particularly of central banks.

So Simple Even a Child Can Understand It

In a sound money environment, on the other hand, there is little confusion or controversy. Under sound money—in which money is a commodity (for discussion purposes let us assume it to be gold)—everyone, to some extent, understands monetary theory. Whether it be an individual, a family, a corporation, or a nation, either one has money or one does not. It really is as simple as that. Even children learn the nature of money. A child quickly learns that the things he wants cost money and either he has it or he does not. If he does not, he quickly grasps that there are ways to get it. He can ask his parents for an increase in his allowance. Or, he can earn the money he needs by doing chores around the house or for friends and neighbors. He might be able to borrow the money for large purchases, promising to pay back his parents either from his future allowance or from anticipated future earnings from doing extra chores. His parents can evaluate this loan request simply by considering the likelihood that his allowance and chore income are sufficient.

The True Believer

A Saul turning into Paul is neither a rarity nor a miracle

By Eric Hoffer 

PART I: THE APPEAL OF MASS MOVEMENTS

There is in us a tendency to locate the shaping forces of our existence outside ourselves. Success and failure are unavoidably related in our minds with the state of things around us. Hence it is
that people with a sense of fulfillment think it a good world and would like to conserve it as it is, while the frustrated favor radical change.

Those who are awed by their surroundings do not think of change, no matter how miserable their condition. When our mode of life is so precarious as to make it patent that we cannot control the

circumstances of our existence, we tend to stick to the proven and the familiar.

The powerful can be as timid as the weak… Where power is not joined with faith in the future, it is used mainly to ward off the new and preserve the status quo.

Fear of the future causes us to lean against and cling to the present, while faith in the future renders us receptive to change.

For men to plunge headlong into an undertaking of vast change, they must be intently discontented yet not destitute, and they must have the feeling that by the possession of some
potent doctrine, infallible leader or some new technique they have access to a source of irresistible power. They must also have an extravagant conception of the prospects and potentialities of the future. Finally, they must be wholly ignorant of the difficulties involved in their vast undertaking. Experience is a handicap.

PART II: WHO ARE THE POTENTIAL CONVERTS?

The New Poor – It is usually those whose poverty is relatively recent… who throb with the ferment of frustration. The memory of better things is as fire in their veins. They are the disinherited and dispossessed who respond to every rising mass movement.

The Abject Poor… are immune to the appeal of a mass movement… The[ir] goals are concrete and immediate. Every meal is a fulfillment; to go to sleep on a full stomach is a triumph; and every windfall a miracle.

The Free Poor – Freedom aggravates at least as much as it alleviates frustration. Freedom of choice places the whole blame of failure on the shoulders of the individual… Freedom [also]
alleviates frustration by making available the palliatives (things to make it feel better) of action, movement, change, and protest.

It would seem that the most fertile ground for the propagation of the mass movement is a society with considerable freedom but lacking the palliatives for frustration (for example, the freeing of
the serfs).

The Folly of Resentment

Socialism is the anti-Semitism of intellectuals

by Theodore Dalrymple

There is one group of people whom it is morally permissible to hate, and of whom in these times of speech codes it is allowed or even obligatory to speak hatefully: namely, the rich. This is rather odd when one thinks of it, for economic resentment was ultimately responsible for more deaths in the last century than racial hatred. Yet to be a racist is to put yourself outside the pale of decent society; to be an economic egalitarian is to establish your generosity of spirit and profound sense of justice.

Perhaps this is because this world’s rewards are not distributed according to anyone’s idea of how they ought to be distributed; that is to say, in accordance with anyone’s individual scale of values. They seem rather to be bestowed capriciously and not in accordance with merit. Some, of course, have merely inherited their wealth; others have made it in ways of which we do not approve or even despise. Not all rich people are well-behaved; indeed, they can be tactless, offensive, vulgar, and tasteless. When Mr. Ambani built his domestic skyscraper in Bombay I was appalled not by the expenditure (though I had walked through the slums of that city) but by the complete aesthetic worthlessness of what he built. To spend a billion dollars on a house and to detract, slightly, from the beauty of the world is, in a way, an achievement; but one of the functions of the rich is to preserve and increase such beauty. These days they don’t make a very good job of it; the rich these days seem often to have no better taste than the poor. One has only to consider the relative prices on the art market to understand that of all personal qualities, good taste is the rarest.

Are We Equal?

The only requirement for equality before the law is that one is a human being

by walter williams

Are women equal to men? Are Jews equal to gentiles? Are blacks equal to Italians, Irish, Polish and other white people? The answer is probably a big fat no, and the pretense or assumption that we are equal -- or should be equal -- is foolhardy and creates mischief. Let's look at it.

Male geniuses outnumber female geniuses 7-to-1. Female intelligence is packed much closer to the middle of the bell curve, whereas men's intelligence has far greater variability. That means that though there are many more male geniuses, there are also many more male idiots. The latter might partially explain why more men are in jail than women.

Watch any Saturday afternoon college basketball game and ask yourself the question fixated in the minds of liberals everywhere: "Does this look like America?" Among the 10 players on the court, at best there might be two white players. If you want to see the team's white players, you must look at the bench. A Japanese or Chinese player is close to being totally out of the picture, even on the bench. Professional basketball isn't much better, with 80 percent of the players being black, but at least there's a Chinese player. Professional football isn't much better, with blacks being 65 percent. In both sports, blacks are among the highest-paid players and have the highest number of awards for excellence. Blacks who trace their ancestry to West Africa, including black Americans, hold more than 95 percent of the top times in sprinting.

The Inflation Fallacy Refuses to Die

In a progressing economy, prices should fall, not remain 'stable' or rise

By Pater Tenebrarum

Seemingly every week another supposedly reputable economist comes out reviving the fallacy that the economy can be 'fixed' by more inflation. There was for instance an article by Paul Krugman in early May, once again extolling the alleged virtues of inflation and deficit spending. There's simply not enough inflation, Krugman assures us. 

It is true that monetary inflation initially creates an illusion that things are 'getting better'. After all, the early receivers of new money will spend it. It is only when this new money has percolated fully though the economy and exerted its effect on prices that the losers become evident (namely all those who either received the new money late or not at all). Moreover, workers can be cheated for a while, as their real incomes tend to decline as a result of inflation.

The problem is that neither inflation nor government spending can create any real wealth. The 'stimulation' that a bout of inflation initially imparts leaves things not merely back at square one when the inflationary policy is stopped, it leaves them in worse shape than before – as scarce capital has been  misdirected and consumed.

The fallacy and fantasy of “getting something for nothing"

Henry Hazlitt on the fallacy of government stimulus

In 1946, Henry Hazzlit wrote in his book “Economics in One Lesson” that “There is no more persistent and influential faith in the world today than the faith in government spending.” The general faith in the federal government’s ability to stimulate the economy has persisted unabated over time, and it might be a good time review the insights of Hazlitt from more than 60 years ago:

Everywhere government spending is presented as a panacea for all our economic ills. An enormous literature is based on this fallacy, and, as so often happens with doctrines of this sort, it has become part of an intricate network of fallacies that mutually support each other. Here we examine the mother fallacy that has given birth to this progeny, the main stem of the network.

Everything we get must in some way be paid for and all government expenditures must eventually be paid out of the proceeds of taxation. Every dollar of government spending must be raised through a dollar of taxation either immediately or ultimately. Once we look at the matter in this way, the supposed miracles of government spending will appear in another light.

A bridge is built by the government primarily “to provide employment.” Two arguments are put forward for the bridge, one of which is heard before it is built, the other of which is heard after it has been completed. The first argument is that the construction of the bridge will provide employment.  It will provide, say, 500 jobs for a year. The implication is that these are jobs that would not otherwise have come into existence.

This is what is immediately seen. But if we have trained ourselves to look beyond immediate to secondary consequences, and beyond those who are directly benefited by a government project to others who are indirectly affected, a different picture presents itself. It is true that a particular group of bridgeworkers may receive more employment than otherwise. But the bridge has to be paid for out of taxes. For every dollar that is spent on the bridge a dollar will be taken away from taxpayers. If the bridge costs $1,000,000 the taxpayers will lose $1,000,000. They will have that much taken away from them which they would otherwise have spent on the things they needed most.

Therefore for every public job created by the bridge project a private job has been destroyed somewhere else. We can see the men employed on the bridge. We can watch them at work. The employment argument of the government spenders becomes vivid, and probably for most people convincing. But there are other things that we do not see, because, alas, they have never been permitted to come into existence. They are the jobs destroyed by the $1,000,000 taken from the taxpayers. All that has happened, at best, is that there has been a diversion of jobs because of the project. More bridge builders; fewer automobile workers, radio technicians, clothing workers, farmers.

We can see the bridge. But if we have taught ourselves to look for indirect as well as direct consequences we can once more see in the eye of imagination the possibilities that have never been allowed to come into existence. We can see the unbuilt homes, the unmade cars and radios, the unmade dresses and coats, perhaps the unsold and ungrown foodstuffs. To see these uncreated things requires a kind of imagination that not many people have. We can think of these nonexistent objects once, perhaps, but we cannot keep them before our minds as we can the bridge that we pass every working day. What has happened is merely that one thing has been created instead of others.

It’s a simple, but frequently overlooked and irrefutable fact that the only way the federal government can “stimulate” (benefit) one group is to “de-stimulate” (tax) another group. As Walter E. Williams explained in his syndicated newspaper column this week, 

“The fact that Congress has no resources of its very own forces us to recognize that the only way Congress can give one American one dollar is to first — through intimidation, threats and coercion — confiscate that dollar from some other American through the tax code.” 

Seen in that light along with Hazlitt’s analysis above, it should be obvious that government stimulus can never really effectively create a net increase in jobs, income or wealth, but can at most only re-distribute and re-allocate jobs, income and wealth through confiscation of private resources. And in most cases, the government’s forcible redistribution will make us worse off because of government inefficiency and inability to re-direct private resources to their highest and best use. But don’t expect the public’s and politicians’ faith in the fallacy of government stimulus do wane, it’s a fallacy and fantasy of “getting something for nothing” that is just too appealing. 

Government Against the People

It Gets Worse in the Late Stages

By Paul Rosenberg

All governments – communist, capitalist, fascist, monarchy, theocracy, whatever – survive on the skim. They take money from productive people, by force or threat of force. However prettied-up or justified this fact may be, it remains the central fact of rulership.

It’s a simple but disturbing truth: A late-stage state’s modus operandi must always be “government against the people” – an MO that is inherently predatory. And it’s not because the participants are all sociopaths (though many are).

At most times, governments try very hard to skim quietly, as with payroll taxes, where the producer’s money is taken away before he or she ever holds it in their hands. That’s also why tariffs were a traditional tax – the average person never saw it, and didn’t feel violated.

But when governments are massively over-extended, they lose the luxury of the quiet skim and become more aggressive. This is simply what happens in long-established, monopolistic institutions, like governments. They spend wildly to make themselves look good, then find they need more money. Not willing to cut their spending, they have two choices:

1.     Debasement of the currency, which they always do first. But this trick never works for very long, since people do engage their minds when conducting commerce and adjust their prices to counteract the debasement.

2.   Squeeze the producers dry, any way they can.

The Problem of Legitimacy

You may wonder why the governments don’t just cut their spending. That would seem an obvious choice. But they can’t cut spending without tarnishing their image as the mighty protector and the great fount of human compassion. People pay taxes willingly because of this high and mighty image; lose the image and you lose tax compliance.

Welfare, Not Full-Time Work, Is Now America's No. 1 Occupation

America, land of the free, has become land of the dependent

by IDB Editorial

"Is Welfare The New Normal?" we wondered in an editorial last Thursday, and we didn't have long to wait for an answer. On Friday an answer came back in depressing new data from the Census Bureau.

CNSNews.com's indefatigable data hound, Terence P. Jeffrey, dug into a few routine Census releases recently and discovered something shocking: More people in America today are on welfare than have full-time jobs.

No, that's not a misprint. At the end of 2011, the last year for which data are available, some 108.6 million people received one or more means-tested government benefit programs — bureaucratese for welfare.

Meanwhile, there were just 101.7 million people with full-time jobs, the Census data show, including both the private and government sectors.

This is a real danger for the U.S. — the danger of dependency. Anytime more people are being paid not to work than to work, it imperils our democracy. No one votes to cut his own welfare benefits. So welfare grows.

In recent years, the welfare state has expanded to create an all-encompassing security blanket to protect Americans from all vagaries of economic life. For everything from losing a job to having trouble paying the rent, there's now a welfare program for it.

Those who say the poor deserve such largess will find no argument here. Sometimes people have such dire need that a helping hand may be necessary, if only for a limited period of time.

But this goes way beyond that.

According to official data from the government, 46.5 million people live in poverty in the U.S. Doing the quick math, that means just 43% of all those on welfare are officially considered poor.

Global Warming: The Wall Street Party Has Begun

The party is on.

by Anthony Wile

And you read it here first.

As we observe this phenomenon, we realize that global warming is going to play a big role in Wall Street's upcoming and ongoing promotion. But let's take it from the top.

Two significant things just happened that confirm a furtherance of this trend.

On November 1st, President Barack Obama signed an executive order instructing states to ready themselves for the "environmental impact" of climate change.

At the same time, one of Hollywood's most successful and power directors, James Cameron, announced he is creating a global warming drama coming to Showtime cable in April and called "Years of Living Dangerously."

April is obviously when this investment party really gets going full-steam. It's blazing hot already. Thanks to the JOBS Act, we're aware that thousands of glossy promotional pitches are being sent via snail mail seeking accredited investors.

We track this stuff. It's truly remarkable. These brochures cost millions and millions to produce. Where's the money coming from? This is a huge promotion. All the big boys are in on it. One last Wall Street blow-off.

That's how they operate. It boggles the mind. People can't conceive of the vastness of these modern promotions. The entire industrial and promotional might of the Western world is seized and put into service – including the President of the United States.

Here's an excerpt from a Yahoo article:

"The impacts of climate change .... are already affecting communities, natural resources, ecosystems, economies and public health across the nation," Obama said in the order. "These impacts are often most significant for communities that already face economic or health-related challenges, and for species and habitats that are already facing other pressures."

Obama named symptoms of climate change as an increase in long periods of excessively high temperatures, more heavy downpours, more wildfires and severe droughts, permafrost thawing, ocean acidification, and rising sea levels.

The task force includes seven Democratic state governors and the Republican governor of Guam, a US territory that is vulnerable to rising sea levels in the Pacific Ocean. Also on the panel are the mayors of a group of major American cities.

Tell your friends and neighbors that the concentrated might of the West's largest corporations is being married to a single, overwhelming promotion buttressed by regulatory changes, advanced by the power of the US president and advertised via Wall Street's most skilled drummers and brokers and they will look at you like you're crazy.

They'll call you a conspiracy theorist.

Why Spy?

Voyeurism as Politics

by Angelo M. Codevilla

Technical prowess notwithstanding, US communications intelligence is dumb congenitally. In a previous column I explained that NSA’s use of sensitive antennas to capt the electronic spectrum, of supercomputers to record “the take,” and of sophisticated algorithms to search it suffer from the same deadly lack of quality control (counterintelligence) that afflicts human collection; moreover that elementary countermeasures reduce even the possibility of capting useful information. The latest revelations that the NSA has been listening to such as German Chancellor Angela Merkel’s private conversations as well as to Cardinals at papal conclaves highlight a more fundamental flaw, namely US government officials’ misunderstanding of intelligence, of the very reason for spying.

Intelligence, by its very nature, is information that you can do something with or about. It is not about reveling in secrets. Trying to learn about secrets apart form plans for action amounts to voyeurism. Worse, intelligence as a giant “fishing expedition” for secrets detracts from focusing on getting information, regardless of source, to accomplish specific objectives. Unfortunately, the very reason why US intelligence in general and NSA’s COMINT in particular gather all they can is that US officials don’t really know what they are doing and foolishly expect intelligence to prompt them.

Officially, all US intelligence, NSA included, works within a “National Intelligence Priorities Framework.” Testifying before Congress James Clapper, Director of National Intelligence, described it as “a huge enterprise… with thousands and thousands of individual requirements.” This “framework” is the end product of the so-called “Requirements Process,” that consists of countless committees and subcommittees from every intelligence agency and executive departments, overseen by the White House.