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“Gold and Liberty” is the title of a book/pamphlet (145 pages) by Richard M. Salsman written in 1995. It was sent to me recently by a very sharp securities consultant and fellow conservative type. I should modify that. Glenn is not so much a conservative as, I think, he wants our government to butt out and let us have our freedoms back. He understands risks and rewards. Like me, I’m not sure he understands why our government should regulate and restrict everything in life except its spending.
Salsman is a strong supporter of the gold standard and free banking. He believes in the discipline of the gold standard and the superiority of markets (free banking) making decisions rather than ‘god-like’ central planners.
He is very hard on central banking. For example, “Over the centuries, the kinds of government operations in most need of central bank financing have changed. The earliest central banks tended to be formed at times of war when government did not want to overtax a citizenry from which it expected patriotic support. Central banks still tend to inflate during wartime today. However, in the past century they expanded to support the massive deficit-spending associated with the welfare state. Central banking powers have expanded through most of the 20th century, together with the expansion of deficit spending, welfare functions, and central planning.”
Salsman finds that Central Banks have failed at almost everything they have been tasked to do. ”The Federal Reserve was established in 1913 to prevent instabilities that were attributed to the private banking system.” He argues that what instabilities in currency and banking were the result of government intervention into the banking system.
Central Banker scheming to take your Money
He concludes that, “Central banking has ‘succeeded’ in only one function, in its original function, as the financier of gigantic government. Central banks are bankers to unlimited governments, governments that spend more than they have been able or willing to levy in taxes on the populace. The advantages of being able to avoid paying for expanded government by taxing voters are obvious. The disruptive effects of such intervention, such as price inflation or reckless banking, can be blamed on ‘greedy’ businessmen and bankers. Constitutionally limited and creditworthy governments do not need central banks. They are able to finance their operations in a free market with ready access to the private credit system.” (emphasis is mine)
I have often thought that a return to the gold standard would provide the discipline to keep government under control. It would prevent the massive deficits now run up by almost every government on earth. If every government debt would have to be paid in gold, every nation would soon have no gold as it would all be held by the individuals and companies who had provided services to the government. Then the governments would have to go to the private investor market and sell investors on bonds that could only be backed by future tax revenue. With a gold standard, how could they spend a trillion dollars they don’t have, like the 111th Congress has done in the past two years?
To me the most telling lines in the book come from none other than Alan Greenspan. Though he served as Chairman of the Fed (the government’s chief banker) from 1987 to 2006, he truly understood what the Fed was all about. Witness this quote from Geeenspan in 1967, from the book:
“The oppostion to the gold standard in any form – from a growing number of welfare-state advocates – was prompted by a much subtler insight; the realization that the gold standard is incompatible with chronic deficit spending (the hallmark of the welfare state). Stripped of its academic jargon, the welfare state is nothing more than a mechanism by which governments confiscate the wealth of the productive members of a society to support a wide variety of welfare schemes. A substantial part of the confiscation is effected by taxation. But the welfare statists were quick to recognize that if they wished to retain political power, the amount of taxation had to be limited and they had to resort to programs of massive deficit spending, i.e., they had to borrow money, by issuing government bonds, to finance welfare expenditures on a large scale…. But government bonds are not backed by tangible wealth, only by the government’s promise to pay out of future tax revenues, and cannot be easily absorbed by the financial markets…. Government deficit spending under a gold standard is severely limited. The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. They have created paper reserves inthe form of government bonds which – through a complex series of steps – the banks accept in place of tangible asses and treat as if they were an actual deposit, i.e., as the equivalent of what was formerly a deposit of gold. The law of supply and demand is not to be conned. As the supply of money (of claims) increases relative to the supply of tangible assets in the economy, prices must eventually rise…. In the absence of a gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold…. Deficit spending is simply a scheme for the hidden confiscation of wealth. Gold stands in the way of this insidious process. It stands as the protector of property rights.” (emphasis is mine)
Are a few central bankers really better at creating a stable economy or would a disciplined marketplace based on a gold standard do a better job?
I’m glad I took the time to read the book and will look for other Salsman titles to round out my understanding of the views of the Objectivists. Maybe the first will be to find a copy of the Intellectual Activist from 2004-2005 to read the first four parts, by Salsman, “The Cause and Consequences of the Great Depression.”
As reported on CNN Money and most news outlets, the Transportaion Department will mandate backup cameras on most passenger vehicles by 2014. The Secretary of Transportation has announced new mandates that are based on a 2008 law. The facts used to convince Congress to pass the Cameron Gulbransen Kids Transportation Safety Act in early 2008 included:
Over 200 deaths each year caused by “back-over” accidents;
Over 44% of those deaths were under the age of 5, and 33% are over the age of 70;
As many as 18,000 injuries occur annually in the U.S. due to accidents while autos are moving in reverse.
Two hundred deaths is a tragic result. Is it reason, however, to mandate an increase in the manufacturing cost of every automobile and most trucks by about $200 each?
About 700 cyclists die each year in on-road accidents. Over 50,000 are injured. According to helmets.org, over 90% of bicycle deaths were victims not wearing a helmet. Are bicycle manufacturers mandated to ship helmets and other safety systems with each bike?
Boating accidents result in about 700 deaths each year and about 4,000 injuries. Is it the boat manufacturer that is mandated to provide life vests?
Somewhere between 25 and 200 children die annually in School Bus accidents, but good luck finding statistics to ferret out the exact numbers. The NHTSA , school districts, and State transportation agencies all report based on different criteria. If a school bus is transporting kids to extra-curricular activities, those statistics are rarely counted. It is estimated that half the “School Bus” deaths could be avoided each year if school busses had, and children used, seat belts. Why no mandate here?
The NHTSA has an almost $900 million budget. I’m sure lots of the research they do is very valuable and ends up saving many lives. I just continue to be concerned when our government has a blank checkbook for all things warm and fuzzy and these things end up causing more regulation and less freedom.
Is this another case of good intentions gone bad in the hands of government regulators?
The Federal Communications Commission (FCC) shows once again how truly apt is the ‘bureaucracy-is-cancer’ metaphor. Cancers multiply their cells feeding off of the host organisms. Cancer can lie in waiting for just the right conditions and then grow exponentially. The FCC is a bureaucracy that has grown and fed off of the public and the markets for communications since 1934, a time of great unrest and change – a time that presented the right conditions for the cancer to start.
Current FCC Chairman Julius Genachowski is riding the wave of elitist liberal thought that says “we are smarter than you and therefore should control you and your activities, for your own good.” It is the set of conditions that was ushered in by a combination of Recession and War and promises of change that swept the nation to elect a Liberal Administration and Congress. Being unelected, but appointed by that new Liberal Administration, Mr. Genachowski has not felt the voting public’s recent rebuke of the Liberal policies that exist today in Washington, D.C. Instead, he sees the right conditions to expand FCC control over new and powerful communications networks that we call “the Internet.”
In 2011, the FCC will spend about $325 Million and will employ 2,000 people (an average of well over $160,000 per employee). With “only” 2,000 employees, will the FCC really be able to regulate the internet? Or will they need a massive injection of staff and money to accomplish this job?
If you want to read a bit about Net Neutrality, I recommend both an article by Sam Gustin in Daily Finance, and one by Craig Pirrong at Seeking Alpha.
I’m not sure I understand the issue well enough at this point to properly weigh in on the overall issue. I do, however, wonder about the FCC and have the following questions:
Is it right to have an agency of the Federal Government, made up of entirely appointed personnel, take control of the internet? Should they be able to basically enact laws (regulations) that will rule the organizations that provide the various components of internet service?
“It is the mission of the Federal Communications Commission to ensure that the American people have available – at reasonable costs and without discrimination – rapid, efficient, nation- and world-wide communication services; whether by radio, television, wire, satellite, or cable.”
It seems to me that the (basically) free market has already provided us with an internet at reasonable costs without discrimination. Will imposing FCC rule and price controls really make it better? Or will it just make government bigger and more powerful?
Another question: When Verizon recently bid $5 Billion for a new chunk (C block) of the 700Mhz bandwidth, where did that money go?
Sorry for the absence and lack of posts. Just returned from a long drive. I drove a company truck and trailer from El Paso, Texas back to McMinnville, Oregon. Since I was already planning to be in Denver to help celebrate a granddaughter’s 4th birthday, I volunteered to return the vehicles since I was half-way there. My wife wanted to join me for the 2000 mile trip which I could not understand until she mentioned how nice it would be to visit Santa Fe on the way (only a couple of hours out of the way). We did spend two very nice days there. We then drove I-40 (parallels the old Route 66) across New Mexico and Arizona and then up I-5 through California and Oregon.
Some observations: El Paso, Texas, and most of New Mexico seemed far less affected by the economic woes of the nation than California and Oregon. In El Paso, Las Cruces, Socorro, Albuquerque, and Santa Fe, there was a lot of construction in progress. Most large commercial and industrial buildings along the freeways (25 and 40) seemed to have full parking lots and much activity. There were big buildings being built and lots of highway construction. That may be due to the high percentage of government activity in New Mexico but it was still striking to me. It seemed like every car I saw was less than five years old – almost no ‘beaters.’
Did you know that there are more scientists per capita in New Mexico than any other state? Or that New Mexico has now surpassed Mississippi for the lowest ranking public school system in America? Quite a contrast.
I was surprised by Santa Fe. More fine art is sold in Santa Fe than any other place in America outside of New York (and occasionally L.A.). There must be 200 or 300 serious fine art galleries in a city of just over 60,000 people.
While in Santa Fe, I was fortunate to hear a presentation by Chuck Bowden, author of the new book Murder City (and about 10 other books). He has lived with the Mexican Drug/Immigration problem for the past 20 years, intimately. He claims that Ciudad Juarez is the most deadly city on earth with over 3000 murders this year alone. With about 300 street gangs and no faith in any of the government institutions, drugs, protection money, and just surviving are daily topics of real life (and death) drama. Interestingly, El Paso, its cross border neighbor may be the safest city in the U.S. with 5 murders so far this year in a town of 600,000. I hope to read the book in the next month and may do a review in this space. It is currently #3 on my list. His comments about Mexico and our border were chilling.
Driving the old Route 66 is not very interesting if there is no time to stop and get involved in anything. My only impression of Arizona was a run-in with Arizona’s Department of Transportation. I drove through the scales upon entry to Arizona on I-40 more as a courtesy than anything since I was driving a simple one-ton pick-up pulling an empty 20 foot flatbed trailer (total weight under 10,000#). I was ordered (not asked politely but yelled an order) to park the vehicle and come into the office. As I opened the door to the office at the weigh station, I found myself 6th in line with 5 very unhappy professional truck drivers. With three people behind the counter, I thought it would be a matter of minutes before I would be through the line and on my way. It took 30 minutes for the first person in line to be ‘processed.’ As one driver mentioned to me, they were just looking for every method possible to bring in money. Of the three, I lucked out and got the one officer who decided to let me ‘get away’ with a 30 day DOT permit to cross the state. It cost me $12 and 45 minutes. Others were not so lucky. One of the woman officers was literally yelling at everyone with whom she came into contact – one of the most nasty creatures I have ever seen. As one truck driver mentioned to me, these are the worst kind of bureaucrat. If they don’t like the way you look or act, it is within their power to make you drive the truck around for a random inspection. Even if everything is perfect with your rig, you can lose a couple of hours. The other woman was just plain dull. She must have asked every question 3 times and retyped everything into her computer three more times. Watching her ‘work’ (there wasn’t much else to do) was like watching paint dry. You would have to work at it to be slower or less competent. They obviously don’t have production standards for these folks. None of the AZDOT employees ever smiled. The atmosphere in the room was toxic.
While driving I listened to an audio book on the iPad. This was a first for me and I will do it more often. The book was the Watchman’s Rattle. I was very impressed. May even buy the print version to underline and dog-ear. It is about the best analysis of where we are today as a society that I have read. Rebecca Costa is very impressive. This may be the most significant book I’ve read in the past couple of years. I highly recommend it. May do a review of this one, too.
In any event, the trip was more interesting than I thought it would be and I returned (happily) to again remember how educational travel can be.
In December of 1970, the Environmental Protection Agency was formed. It’s first year budget was just over $1 Billion and it had an initial year staff of just over 4,000 people.
The 2010 budget for the EPA is over $10 Billion and the staff now numbers well over 17,000.
In 40 years, we have spent well over $200 Billion and employed an average of 15,000 people to:
“Protect human health and the Environment”
Can anyone out there tell me what we have accomplished with this manpower and money?
Here is an interesting site with the answer. I defy anyone to read the EPA’s own exaggerated listing of accomplishment and tell me how it took 15,000 people working full time for 40 years to get this done.
In my not-so-humble opinion, this is just a sample of Federal Bureaucracy that could be DRASTICALLY cut with almost no real cost to “production.”
Your thoughts?
Not Nuts about the EPA
If you are looking for a “context” in which to view the EPA, try thinking about Southwest Airlines. If we spent our $10 billion on SWA, that would have bought all their services for 2009 – their revenue was almost exactly the same as the EPA’s expenditures. But……instead of more regulations, you could have flown over 3,200 flights a day and, yes, eaten over 90 million bags of peanuts, swilled over 63,000,000 cans of soda, water, or juice, and carried 180,000,000 pounds of cargo. Just thought you’d like to know.
Oh, yes. We would have employed almost exactly twice as many people, too.
I am often amazed at how the context in which something is presented affects what we read, see, or hear. It also seems that politicians work hard to form arguments in a context that obscures the otherwise untenable position they support.
In an earlier life, I was part of a citizen’s committee to help craft a ‘sign ordinance’ for our town. I am a strong believer that either you participate in the process or you shut up and take your medicine. But this was a hard one for me. Don’t get me going about sign ordinances in general.
The committee met about a dozen times for an hour or more and each member spent quite a few hours researching, studying, and generally trying hard to come up with reasonable solutions to appease the public without overly restricting the rights of the sign owners/merchants, etc. It never ceased to amaze me the passion people had for restricting “ugly, commercial signs.” What also amazed me is how people could get all fired up about a few signs, calling them “a blight on our community” or “the ugliest structures ever made by man.” Yet, they could not even see, let alone object to, the telephone and power poles that were present everywhere, in residential as well as commercial areas. In the context of their passion about how ugly the signs are, most folks miss the power poles that truly are ugly. The picture below is an example:
Signs are Ugly/Poles are Not?
Have you ever heard of a city ordinance against power and phone poles because they are ugly? The anti-sign crowd likes to claim that signs are not necessary, yet right next to the sign for a gift store is a sign of the same size directing you to the City Library.
Here are a few things that make me wonder and each shows just how the context of the situation or statistic determines how it is viewed:
Number One – In Iraq, in 2009, there were 149 U.S. personnel killed. That is a lot of people and something that should cause a good deal of concern. This is a political hot button issue and these deaths get a great deal of press, as they should. (source - http://icasualties.org/) In Washington, D.C., in 2009, there were 144 people murdered, the lowest number since 1966. With a population of almost exactly 600,000 that means a rate of 24 per 100,000 (from - http://www.disastercenter.com/crime/dccrime.htm). There were approximately 200,000 U.S. personnel in Iraq in 2009 so the death/murder rate in Iraq would be about three times that of Washington D.C., unless you take the entire population. In that case (estimates vary widely, pending the source and the political intent of the study/report), there were about 4700 civilians plus about 300 soldiers killed in Iraq in 2009. With a population of about 32,000,000, that would indicate a “murder rate” of less than 16 per 100,000. Doesn’t this mean that it is 50% more dangerous to be a resident of Washington, D.C. than of Iraq. Where is the outrage about crime in Washington, D.C. to match the outrage over the deaths in Iraq? I guess it is because we view crime in D.C. as a normal thing and in that context, 144 murders is no big deal. A war, anywhere, is not a normal thing so loss of life in a war is a big deal?
Number Two – Actor Wesley Snipes was convicted of tax evasion for not filing his required tax returns. He has a pretty high profile and I am sure part of his 3+ year sentence was meant by the IRS and the Courts to send a message to others who would consider evading taxes. He has lots of friends and fans, but sending him to jail will only really hurt his immediate family to any great degree. On the other hand, Secretary of the Treasury, Timothy Geithner did not pay his taxes for four years. He was then audited and ordered to pay about $35,000 in back taxes, he did not do so for almost two years until President Obama offered his name for Treasury Secretary. He then paid but wasn’t charged interest or any fines. Had he been jailed for tax evasion (which was the clear case, at a minimum for the two years after the audit) many people would have been hurt. And many of those people were very powerful people, like the President. In the context of Wesley Snipes, Geithner would have made a better example of what happens if you evade taxes. In the context of the powerful in Washington, this lawbreaking is hardly noticed …..like the telephone poles.
Number Three – Much like our belief in the rule of law, most Americans believe that justice is blind, or at least, should be. The idea is that if we lend power to our government to allow it to help us keep social order, that power will neither be abused nor used to favor one group over another. Yet, in the context of fair and equitable laws and justice, we constantly allow our government to favor one group over another. Examples? Ill-named “Equal Opportunity” laws and regulations established by our government regularly give advantages for one group over another. Tax policy becomes codified in ways that say that if you make more money than I do, you must pay taxes at a higher percentage than I. Labor law famously favors groups of workers who join Unions over groups of workers who employ others. Why do we allow this? It is because of the context within which the argument is framed.
Number Four – In the context of hour long waits in line for fuel and prices doubling for gas in a year, it was easy for politicians to sell the public on the need for a Department of Energy. Again we were asked to forfeit a bit more power and a bit more of our hard-earned money to our government to pay for a “needed” agency to help save us from greedy foreign suppliers of fuels. The Department of Energy was formed by an act of Congress and signed by President Jimmy Carter in the Summer of 1977. In the 30 years since it began operations in 1980, what has the Department of Energy done for us, in exchange for the power over us and the tax dollars spent to enable its activities? What have 15,000 government employees and about $25 Billion a year produced? It is a good question. The better question is: If, today, there were no Department of Energy, how much better or worse off would we be? My guess? We would have somewhere near $25 Billion in tax dollars to spend on something of value.
Final thought on “context:” Politicians tend to manufacture crises to which they propose government solutions. If we continue to allow politicians to manipulate us in this way, government will continue to grow and freedoms will continue to shrink. It’s time for us to start looking at the picture and ignore the frame.
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