Quote of the Day: Man is Not Made for the State; the State is Made for Man

In communism, the individual ends up in subjection to the state. True, the Marxist would argue that the state is an “interim” reality which is to be eliminated when the classless society emerges; but the state is the end while it lasts, and man only a means to that end. And if any man’s so-called rights or liberties stand in the way of that end, they are simply swept aside. His liberties of expression, his freedom to vote, his freedom to listen to what news he likes or to choose his books are all restricted. Man becomes hardly more, in communism, than a depersonalized cog in the turning wheel of the state.

This deprecation of individual freedom was objectionable to me. I am convinced now, as I was then, that man is an end because he is a child of God. Man is not made for the state; the state is made for man. To deprive man of freedom is to relegate him to the status of a thing, rather than elevate him to the status of a person. Man must never be treated as a means to the end of the state, but always as an end within himself.

This is from Martin Luther King's 1958 paper “My Pilgrimage to Nonviolence” (hat tip AEI's Mark Perry)

How Hyperinflationary Policies Ushered in China’s Communist Rule

Austrian economist and professor at Northwest University Richard M. Ebeling in a recent article articulates how the Chinese government’s hyperinflationary policies, which financed her war with Japan 1937-1945 and the civil war compounded by the “dictatorial” Nationalist government, ushered in the communist tyrannical rule.

Here is a slice. From Epic Times (hat tip Bob Wenzel) (italics original)

Inflations have undermined the cultural and economic fabric of society, bringing about social chaos and revolution. Inflation is the enemy of social order and economic stability. Inflation can destroy accumulated wealth, ruin the entire well being of broad sections of a country’s population, and sometimes bring about radical change in a nation’s political system. When combined with war, inflations tear apart the human community.

One example is the Great Chinese Inflation of the 1930s and 1940s. Indeed, the destruction of the Chinese monetary system during this period helped Mao Zedong’s communist movement come to power on the Chinese mainland in 1949.

In the nineteenth and early twentieth centuries, Imperial and then Republican China had no central bank. The monetary system was based on a diverse network of private banks operating in the various regions of the country. While copper was widely used in coins, the primary medium of exchange was silver, and the entire Chinese economy functioned on an informal silver standard for most of this time. A year after Chiang Kai-shek’s Nationalist (or Kuomintang) Party came to power in Nanking in 1927, the Central Bank of China was established with its headquarters in Shanghai, and the country was formally put on a Chinese silver-dollar standard.

Read the details here

 

The real effects of inflationary policies to the Chinese political economy. Again Professor Ebeling

But it is nonetheless true that whatever basis of popular support Chiang’s government might have had against the communists at the end of the Second World War, especially among the country’s middle class, was undermined by the inflation. It destroyed the wealth and savings of the Chinese middle class, and created chaos in virtually all commercial dealings due to the loss of a reliable and stable medium of exchange for purposes of rational economic calculation and business planning.

In addition, the inflation and its effects drove some segments of the rural population into a more severe poverty than even the war had generated. Thus, whatever support the Nationalist government may have had in the countryside soon withered away, as well.

Also, during and after the war, the Nationalist government imposed unworkable price and wage controls as a supposed tool to “fight” price inflation that only succeeded in creating even more distortions and imbalances throughout the Chinese economy due to shortages, black markets, and mounting corruption.

Its policies produced the social and economic unrest that played right into the hands of the communists, as Mao’s revolutionary government promised to do away with the corruption and abuse of Chiang’s Nationalist government.

The hyperinflationary policy followed by the Nationalist Chinese government, therefore, helped bring about more than half a century of Marxist tyranny on the mainland of China, a communist tyranny under Mao Zedong that historians have estimated cost the lives of at least 80 million innocent men, women and children in the name of building the “bright socialist future.”

I find some relevance with China’s inflationary policies of 1930-40s with current stylized policies and politics. Except that the sequence appears to be backwards.

Then inflationary policies had been designed to finance China’s war economy. However today, both China and Japan have been inflating bubbles with the aim of generating economic growth (really—statistical growth, and really—subsidies to the cronies of the Chinese government and State Owned Enterprises (SOE) as well as Japan’s Wall Street) and the ensuring of the tenures of their respective political leaders. 

[Note I included Japan in the above commentary due to the recent controversy which has historical significance.]

However, slowing growth even from statistical measures from the intensifying embrace of bubble policies have placed increased political pressure on both governments. And instead, the current bubble (inflationist) policies have amplified on the credit risks (and other associated risks) for both economies amidst an environment of slowing growth.

So to divert the public’s attention from the real problems, both governments has resorted to diversionary tactic of brinkmanship politics via territorial disputes aimed at the incitement of nationalist sentiment to generate popular support for their respective governments. 

This has also been impliedly contrived to further justify their current inflationary policies with even bigger defense spending. Both China and Japan, a staunch US ally, will raise their defense budget this year.

The peculiarity is that despite the hullabaloo over Senkaku Islands and so the so-called “China threat’ as portrayed by western media, the Chinese government as well as partly Chinese investors continue to indirectly finance the US war machine via record acquisition of US Treasuries. 

The danger of inflationism has been its relationship with wars. The next question is what happens when all these seeming theatrics risks becoming real even by accident? Will massive inflationism lead to World War III or even a nuclear Armageddon?

Or will communism and its close sibling socialism rear its ugly head again, not just in China but to practitioners of inflationism elsewhere?  

Recently Adolf Hitler’s anti-semitic book 'Mien kampf' has seen a surge in sales.

Signs of things to come?

Richard Ebeling: How Karl Marx Brought Ruin to the World

Splendid article from Austrian economist and Northwood University professor Dr. Richard M. Ebeling on the horrific consequences from the bad ideas of Karl Max. (hat tip EPJ)

Karl Marx was born on May 5, 1818 in the German Rhineland town of Trier, and died on March 14, 1883 in London.It is worth recalling, also, that there was a time when Marx was an anti-communist.

It is said that by its fruit you will know the tree. The last one hundred years is a clear testament to the consequences of Marx’s influence on modern history.

Accepting the “classical” labor theory of value, he concluded the workers were “exploited” by the “capitalists.” Marx claimed that “profit” was a portion of the workers’ output extracted by the property owners as the “price” the workers had to pay to have access to the privately owned physical means of production, without which they could not produce and survive.

The Austrian economist, Eugen von Boehm-Bawerk, in Capital and Interest (1884) and Karl Marx and the Close of His System (1896), demonstrated that Marx had confused “”profit” with “interest.” In a competitive market, profit is a temporary discrepancy between selling price and costs-prices, eventually competed away by businesses bidding up wages for workers (and other resource prices) to work for them, and those same businesses then competing for consumers to buy their output by offering their wares at better selling prices than their rivals.

What Marx had failed to fully understand was that production takes time, and that if workers would not or could not wait until the product was finished and sold to consumers to receive their wages, then someone had to “advance” those wages to them over the production period.

That, Boehm-Bawerk showed, is what the employers did, so that what workers received while working was the discounted value of their marginal product. The “gain” received by employers over their costs of production, even in long-run equilibrium, was the implicit interest for having ‘waited” for the product to be finished and sold, when they might have done other things with the “savings” they had advanced to those workers during the period of production.

If it is recognized that “time” has value, and, therefore, an intertemporal price, the notion that workers were or could be “exploited” in open, competitive markets for resources and finished goods was fundamentally wrong.

On this foundation of sand, Marx constructed his theory of the “injustice” of capitalism that has, in various forms, continued to plague the ideas and policies of countries around the world.

In the 20th century, it inspired the communist revolutions that led to the deaths of tens of millions of innocent men, women, and children. For those not aware of the magnitude of this human catastrophe, I recommend, The Black Book of Communism (1997), written by former French socialists and “fellow-travelers, that tells the horrific tale of “socialism-in-practice,” wherever those guided by Marx’s ideas came to power.

Or Paul Hollander’s edited volume, From the Gulag to the Killing Fields (2007), that brings together excerpts from the personal accounts of those who lived through the “building” of the brave new worker’s paradise, with all their tragic details about the fate of those considered “enemies of the people,” or merely expendable cogs in the wheel of socialist central planning.

Pls read the rest here

Here are the ten planks of the communist manifesto (Wikipedia.org)

About four them are prominent features in today’s supposed market economies; particularly progressive taxation, central banking, centralization of communications and transport (this is more indirect for more open economies and direct for authoritarian states) and public school.

One would wonder how the mainstream supposedly loathes communism as to embrace some of its principles, and how communist principles have been adorned as “capitalism”.

George Orwell in 1984 would call such opaqueness and blatant contradiction as Blackwhite newspeak: (bold original)

...this word has two mutually contradictory meanings. Applied to an opponent, it means the habit of impudently claiming that black is white, in contradiction of the plain facts. Applied to a Party member, it means a loyal willingness to say that black is white when Party discipline demands this. But it means also the ability to believe that black is white, and more, to know that black is white, and to forget that one has ever believed the contrary. This demands a continuous alteration of the past, made possible by the system of thought which really embraces all the rest, and which is known in Newspeak as doublethink.

Chart of the Day: How Americans Feel About Paying Income Taxes

From a study by Pew Research:

As April 15 approaches, a majority of Americans (56%) have a negative reaction to doing their income taxes, with 26% saying they hate doing them. However, about a third (34%) say they either like (29%) or love (5%) doing their taxes.

I wonder how many of those who say they like doing taxes are being honest on themselves, and how many may have been simply social signaling.

I wonder too how these "like-love" camps will feel with a slew of new or higher taxes, especially from Obamacare.

 

Here is a noteworthy quote from former Commissioner of Internal Revenue T. Coleman Andrews.

I don't like the income tax. Every time we talk about these taxes we get around to the idea of 'from each according to his capacity and to each according to his needs'. That's socialism. It's written into the Communist Manifesto. Maybe we ought to see that every person who gets a tax return receives a copy of the Communist Manifesto with it so he can see what's happening to him.

Here is the link on 10 planks of the communist manifesto

Video: Robert Wenzel on the Collapse of the Soviet Union: Facts versus Myths

At the recent Austrian Economics Research Conference held in the Mises Institute, Economic Policy Journal's Robert Wenzel gives an excellent speech examining the real factors that led to the collapse of the Soviet Union.

A Father’s Lesson to a Communist Son

The illusions of communism exposed in practical applications.

 

Written by an anonymous commenter at the Nation State:

My stepson is 16. He posted on his FB that he is now a communist. He is just doing it because he knows it pisses me off. I acted like I didn't care and posted the following (below). Then I changed his password. He had no idea I knew his password. It is still there for all his friends to see. He is really pissed off. I took the door off his bedroom. He has no privacy now.

I took all his video games and stuff and set them up in the sun room for his 8 year old sister to use. Instead of giving him his weekly allowance, I split it up between him and his sisters. Then I took him down to Lucky's supermarket and made him apply for a job. They hired him the next day. But I told him he has to bring home his paycheck every Thursday so I can split it up amongst everybody. He is not very happy. His mother is backing me up 100%. His work load is almost unbearable for a 16 year old.

com·mu·nism (kmy-nzm) - NOUN: A theoretical economic system characterized by the collective ownership of property and by the organization of labor for the common advantage of all members.

... Garrett, since you into communism-I will support you. To keep things at home in the spirit of things, all of your possessions are now shared with your sisters. You will now have to share in the workload of chores at home. All of them.
 

Since your mother and I are Capitalists we are exempt. Since you are the only communist at home, you get to do ALL the chores.

Sourced from Economic Policy Journal

Graphic of the Day: EUSSR

British author, journalist and politician Daniel Hannan at the Telegraph writes,

Take a close look at this promotional poster. Notice anything? Alongside the symbols of Christianity, Judaism, Jainism and so on is one of the wickedest emblems humanity has conceived: the hammer and sickle.

For three generations, the badge of the Soviet revolution meant poverty, slavery, torture and death. It adorned the caps of the chekas who came in the night. It opened and closed the propaganda films which hid the famines. It advertised the people's courts where victims of purges and show-trials were condemned. It fluttered over the re-education camps and the gulags. For hundreds of millions of Europeans, it was a symbol of foreign occupation. Hungary, Lithuania and Moldova have banned its use, and various  former communist countries want it to be treated in the same way as Nazi insignia.

Wonder why the euro, with its current thrust towards centralization (fiscal union, banking union, bank supervision), seems headed for perdition?

Quote of the Day: Overrated Sincerity, Incorruptibly Evil

Another reason when corruption seems a better option…

As far as I know, Robespierre, Lenin, Stalin, Mao, and Pol Pot were indeed unusually incorruptible, and I do hate them for this trait. 

Why?  Because when your goal is mass murder, corruption saves lives.  Corruption leads you to take the easy way out, to compromise, to go along to get along.  Corruption isn't a poison that makes everything worse.  It's a diluting agent like water.  Corruption makes good policies less good, and evil policies less evil.

I've read thousands of pages about Hitler.  I can't recall the slightest hint of "corruption" on his record.  Like Robespierre, Lenin, Stalin, Mao, and Pol Pot, Hitler was a sincerely murderous fanatic.  The same goes for many of history's leading villains - see Eric Hoffer's classic The True Believer.  Sincerity is so overrated.  If only these self-righteous monsters had been corrupt hypocrites, millions of their victims could have bargained and bribed their way out of hell.

This stirring excerpt is from George Mason University economics professor, Econolog blogger and author Bryan Caplan. [Source: Library of Economics and Liberty]

Has Communism been Shaped by Karl Marx’s Self-hatred?

Not to be accused of Tu Quoque “you too” fallacy, experience plays an important part in influencing our outlook and personal philosophy. Has self-hatred been the cornerstone of Karl Marx’s political philosophy known as Communism?

Here is an excerpt of the narration by Murray N. Rothbard of Karl Marx’s path to Marxism, (bold added)

Also prefiguring the man was a trait that Marx developed early in his youth and never relinquished: a shameless sponging on friends and relatives. Already in early 1837, Heinrich Marx, castigating his son Karl's wanton spending of the money of others, wrote to him that "on one point … you have wisely found fit to observe an aristocratic silence; I am referring to the paltry matter of money." Indeed, Marx took money from any source available: his father, mother, and throughout his adult life, his long-suffering friend and abject disciple, Friedrich Engels, all of whom fueled Marx's capacity for spending money like water.

An insatiable spender of other people's money, Marx continually complained about a shortage of financial means. While sponging on Engels, Marx perpetually complained to his friend that his largess was never enough. Thus, in 1868, Marx insisted that he could not make do on an annual income of less than £400-£500, a phenomenal sum considering that the upper tenth of Englishmen in that period were earning an average income of only £72 a year. Indeed, so profligate was Marx that he quickly ran through an inheritance from a German follower of £824 in 1864, as well as a gift of £350 from Engels in the same year.

In short, Marx was able to run through the munificent sum of almost £1200 in two years, and two years later accept another gift of £210 from Engels to pay off his newly accumulated debts. Finally, in 1868, Engels sold his share of the family cotton mill and settled upon Marx an annual "pension" of £350 from then on. Yet Marx's continual complaints about money did not abate.

As in the case of many other spongers and cadgers throughout history, Karl Marx affected a hatred and contempt for the very material resource he was so anxious to cadge and use so recklessly. The difference is that Marx created an entire philosophy around his own corrupt attitudes toward money. Man, he thundered, was in the grip of the "fetishism" of money. The problem was the existence of this evil thing, not the voluntarily adopted attitudes of some people toward it. Money Marx reviled as "the pander between … human life and the means of sustenance," the "universal whore." The Utopia of communism was a society where this scourge, money, would be abolished.

Karl Marx, the self-proclaimed enemy of the exploitation of man by man, not only exploited his devoted friend Friedrich Engels financially, but also psychologically. Thus, only three months after Marx's wife, Jenny von Westphalen, gave birth to his daughter Franziska in March 1851, their live-in maid, Helene ("Lenchen") Demuth, whom Marx had "inherited" from Jenny's aristocratic family, also gave birth to Marx's illegitimate son, Henry Frederick. Desperately anxious to keep up haute bourgeois conventions and to hold his marriage together, Karl never acknowledged his son, and, instead, persuaded Engels, a notorious womanizer, to proclaim the baby as his own. Both Marx and Engels treated the hapless Freddy extremely badly, Engels's presumed resentment at being so used providing him a rather better excuse. Marx boarded Freddy out continually, and never allowed him to visit his mother. As Fritz Raddatz, a biographer of Marx, declared, "if Henry Frederick Demuth was Karl Marx's son, the new mankind's Preacher lived an almost lifelong lie, and scorned, humiliated, and disowned his only surviving son." Engels, of course, picked up the tab for Freddy's education. Freddy was trained, however, to take his place in the working class, far from the lifestyle of his natural father, the quasi-aristocratic leader of the world's downtrodden revolutionary proletariat.

Marx's personal taste for the aristocracy was lifelong. As a young man, he attached himself to his neighbor, Jenny's father Baron Ludwig von Westphalen, and dedicated his doctoral thesis to the baron. Indeed, the snobbish proletarian communist always insisted that Jenny imprint "nee von Westphalen" on her calling card.

I suggest a read of the entire article which is rather short and includes Karl Marx’s supposed conversion to "militant atheism"

The point being; people who in good intentions believe that public welfare can be acquired through the collectivist route via communism or related socialist branches thereto, are in fact running contrary to their desires. A philosophy founded on seeming self-hatred or founded on base human instincts will not bring about prosperity but perdition through violence.

Proof of this has been the harrowing 20th century experiment where about 94 million people perished, according to the Black Book of Communism, out of the desire to achieve a utopian communist society. In other words, it took 94 million lives to prove a failed experiment and an unfulfilled utopia. Yet many are still out there preaching the same.

Do We Need Central Banks?

Tim Price at the Sovereign Man asks why the need for a central bank? (bold emphasis original)

A typical if feeble answer is that we need a lender of last resort. To which the answer is… Why? Why do we need a government-appointed entity to support banks that get in over their heads?

A typical answer is that if our banks start failing, our society starts going down the toilet. (It already has, but never mind.)

So now we have the worst of all possible worlds. Our banks are already failing, in the sense of no longer functioning according to the principles of offering an economic rate to depositors and offering economic funding to borrowers.

Plus, now we have ended up with a handful of quasi-nationalised banking group zombies that appear to be being run for the sole purpose of being granted dollops of money that they are free to hoard whenever the central bank deems it appropriate to depreciate our currencies some more.

If our banks were free to fail, a) we would have no need of a central bank, and b) we would have no need for banking guarantees.

Banking deposit agreements would simply come with a giant ‘Caveat Emptor’ on them, and depositors might be able to start earning a positive real interest rate on their savings again.

Abolishing central banks and their core functions would have the happy and non-trivial side effect of reintroducing something akin to sound money into the world economy, rather than live with permanent inflation and have the entire economy held hostage by banking interests.

In reality central banks exists as backstop financiers to the welfare-warfare state. For instance, wars has been facilitated and enabled by the existence of central banks.

Professor Gary North explains

The sinews of war are strengthened by central banking. This is why textbooks praise the Bank of England. It let the British fight longer wars and more destructive wars. The message: get a central bank for your nation, so that your politicians can declare war more readily and stay in that war far longer.

Central banks signify as central planning and the politicization of money. They are part of the 10 planks of Karl Marx’s Communist Manifesto.

Centralization of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly.

Yes it's a delusion to equate capitalism with 'communist' central banking.

Central banks also promote the interests of the banking and political class at the expense of society through inflationism which not only causes boom bust cycles, but importantly has been diminishing the purchasing power of our currencies. This why a huge amount of the public’s resources have been funneled to insolvent “zombie” banks and bankrupt states.

And this is why once zombie institutions become desperate they resort to other measures of financial repression and take the political route towards despotism. And this is also why the private sector will always become the scapegoat for policy errors. That's until people don't understand the essence of central banking.

Yes, I agree Mr. Price, we need the de-politicization of money or the return to sound money through the free markets.

End the Fed. End all central banking.

Chart of the Day: Kim Jong il’s Heritage: North Korea’s Earth Hour from Poverty

North Korea has been one country that has practiced what environmentalists celebrate as “Earth Hour”. I have earlier posted this.

Seen from a satellite photo, while South Korea has been prominently lighted at night (lower portion), North Korea stands in the dark (upper portion) where the only place lit is that of the palace of Mr. Kim. [yeah equality]

But there is a fundamental difference.

The North Korean exercise has not been designed to fulfill environmental preservation goals but has been driven by dire poverty…

This can be seen by the above chart from Reason and Washington Post

Writes the Washington Post

During the early 1970s, North Korea’s economy stagnated, with GDP per capita flatlining until Kim Il Sung’s death. Then, in 1994, after Kim Jong Il took over, the economy started shrinking noticeably, per capita incomes fell, and the country became dependent on emergency U.N. food aid to stave off famines that had already killed as many as 3 million people. North Korea became, as Eberstadt puts it, “the world’s first and only industrialized economy to lose the capacity to feed itself.” (That said, there’s evidence that North Koreaw as growing weakly in the last few years of Kim Jong Il’s rule).

At the moment, North Korea’s per capita income is less than 5 percent of the South’s. As the Atlantic Council’s Peter Beck puts it, “Each year the dollar value of South Korea’s GDP expansion equals the entire North Korean economy.”

Overall I see several lessons

The thrust of most environmental politics has been directed at atavistic policies, or attempts to retrogress world conditions similar to the medieval times or to one of absolute poverty (ala North Korea).

Second, there is no exemplary way to achieve atavism than to adapt the paragon of statism/socialism/communism—Kim Jong il version. In North Korea almost everyone is equally poor and equally without lights, except the political leaders.

Third, the concrete evidence of attaining economic prosperity can be seen in the diametric paths of governance undertaken by two Koreas: South Korea’s capitalism or market economy vis-à-vis Kim Jong il’s brand of statism/socialism/communism.

Yet bizarrely, many fantasize about having successful economic development by the taking on the latter’s path.

Russia’s Putin Loses Majority, Resurgence of Communists

Russia’s Vladmir Putin’s leadership appears on the edges.

From Reuters,

Russian voters have dealt Vladimir Putin's ruling party a heavy blow by cutting its parliamentary majority in an election that showed growing unease with his domination of the country as he prepares to reclaim the presidency.

Incomplete results showed Putin's United Russia was struggling even to win 50 percent of the votes in Sunday's election, compared with more than 64 percent four years ago. Opposition parties said even that outcome was inflated by fraud.

Although Putin is still likely to win a presidential election in March, Sunday's result could dent the authority of the man who has ruled for almost 12 years with a mixture of hardline security policies, political acumen and showmanship but was booed and jeered after a martial arts bout last month.

United Russia had 49.94 percent of the votes after results were counted in 70 percent of voting districts for the election to the State Duma, the lower house of parliament. Exit polls had also put United Russia below 50 percent.

And desperation against Putin’s autocratic crony capitalism has fueled the resurgence of communists.

From another Reuters article,

The Communist Party (CPRF) for most Russians evokes images of bemedaled war veterans and the elderly poor deprived of pensions and left behind in a "New Russia" of glitzy indulgence. Large swathes of society have appeared beyond the reach of the red flag and hammer and sickle.

Not that the Communist Party's doubling of its vote to about 20 percent presages any imminent assault on power. The memories of repression in the old communist Soviet Union, the labor camps and the "Red Terror" are still too fresh for many. But vote they did, if perhaps with gritted teeth.

"With sadness I remember how I passionately vowed to my grandfather I would never vote for the Communists," Yulia Serpikova, 27, a freelance location manager in the film industry, told Reuters. "It's sad that with the ballot in hand I had to tick the box for them to vote against it all."

For many Russians disillusioned by rampant corruption and a widening gap between rich and poor, the communists represented the only credible opposition to Putin's United Russia.

For some, desperation means jumping from the frying pan to the fire. The communist resurgence, who seem to base their preference by nostalgia, never seem to realize that Putin has been a product communism who used his position to snare power and to shape the current system.

They should rather realize that economic freedom and free trade will give them more chances of attaining prosperity than to depend on politicians, who will use all sorts of power grabs to enhance their status and privileges at the people’s expense.

Tradeoffs are a fact of life. The choice of politics over markets means greater risks of gaming of the system, corruption, wealth and power inequality, cronyism and poverty. It's a lesson that most people have yet to learn and digest.

Has the Growing Use of Violence by the Occupy Wall Street Movement Been Exposing their True Agenda?

Has the Occupy Wall Street (OWS) movement been gradually revealing their true nature (or purpose) by turning violent?

This from The Foundry of the conservative Heritage Foundation Network (bold emphasis mine)

On Friday night in Washington, D.C., the Occupy protests turned violent when activists marched on the city’s convention center in opposition to an annual summit held by the conservative Americans for Prosperity Foundation. Forbes reports on the conflict:

“Occupiers, many of whom had their faces obscured by masks or bandanas, began banging on the transparent glass walls and doors of the building, demanding entrance, then attempting to gain access by pushing their way in when guests came or went. Eventually all doors bar one at L Street were locked, with AFP guests and accredited press able to do nothing but stand inside and watch the clash intensify, with a line of police and security guards manning the locked doors at the Mt Vernon St entrance.”

At one point, a 78-year-old woman who was attending the event was knocked down some stairs while attempting to get around the protesters, as this video shows. She reportedly wound up with a bump on her head and a bloody nose. One occupier forced her children into the center of the protest, and four protesters were injured by a car when they were intentionally obstructing traffic. D.C. Police Chief Cathy Lanier said of the violence, “That is no longer a peaceful protest” and that the protesters have become “increasingly confrontational and violent toward uninvolved bystanders and motorists.”

In New York, women were recently forced to set up a “safety tent” after a rash of sexual assaults and fear of more sexual predators joining the protests. In October, Baltimore occupiers discouraged women from reporting sexual assaults and rapes to the police. Also in New York, an occupier turned violent this week in a McDonald’s often used for bathrooms when the restaurant refused to give him free food.

These incidents follow violence last month in Oakland, California, in which protesters shut down a busy port, took over abandoned buildings, set fires, burned American flags, defaced private property and destroyed ATMs. And as the movement turns violent, news is emerging regarding the Occupy movement’s radical, left-wing affiliations.

Heritage’s Lachlan Markay reports that as the Occupy Wall Street begins taking in hundreds of thousands of dollars in donations, an organization known as the Alliance for Global Justice (AFGJ) has been retained to process the transactions. That group’s other activities and associations are cause for alarm:

“The AFGJ provides ‘grassroots’ support for organizations that pursue ‘a socially, ecologically and economically just world,’ according to its website. Among its initiatives are efforts to encourage American soldiers to desert and an anti-George Bush organization founded by members of the Revolutionary Communist Party.

The organization’s president, Katherine Hoyt, leads the Alliance’s Nicaragua Network program, which supports the country’s Marxist Sandinista political party — and was founded for the explicit purpose of overthrowing the country’s government. Hoyt previously worked for the Sandinista government, and has written numerous scholarly works lauding the group. The Sandinistas ruled from 1979 to 1990. Their leader, Daniel Ortega, was elected again in 2006.”

Another of AFGJ’s affiliates: George Soros. His Open Society Institute has given the group $100,000. The Occupy Wall Street movement has other supporters, too, including Big Labor. The AFL-CIO took out advertisements supporting the protests and, according to The Washington Post, “Labor groups are mobilizing to provide office space, meeting rooms, photocopying services, legal help, food and other necessities to the protesters.” And despite the violence and radicalism, it’s a movement that President Barack Obama and others on the left have been quick to support, too.

More OWS videos from Charleston Voice here

It seems that these protesters have began to implement what their leaders may have programmed them to do.

In the words of Karl Marx and Friedrich Engels (bold emphasis mine)

The Communists disdain to conceal their views and aims. They openly declare that their ends can be attained only by the forcible overthrow of all existing social conditions. Let the ruling classes tremble at a Communistic revolution. The proletarians have nothing to lose but their chains. They have a world to win.

And in rebuking the Vatican support for Occupy Wall Street, I previously wrote

Just how can love or ‘ethic of solidarity’ be attained through the enforcement of redistributionist policies that have been anchored on violence?

Heaven on Earth.

I guess, if the above indications should hold true then I stand corrected.

In the 20th century communism has killed an estimated 94 million people more than Nazi Germany’s 25 million.

In short, communist revolutions and the many attempts to impose communist systems around the world has proven to be “Hell on earth”.

OCW’s turn to violence may not just be a presidential re-election strategy but a holistic campaign to resurrect a failed colossal political experiment that simply won’t go away.

North Korea: The Geopolitics of Blackmail

Forbes columnist Gady Epstein writes, (bold emphasis mine)

North Korea’s shelling today of a South Korean island has reminded the world again of the perennial problem of what to do about the nuclear-armed state. This comes just days after we hear that North Korea has shown off an advanced uranium-enrichment facility, a reminder, too, of how dangerously resourceful this regime can be even as its people face another winter of food and electricity shortages.

In totalitarian states where society have been enslaved by the ruling political class and the bureaucracy, the state can only survive by predation.

Lacking the resources to plunder from its own, totalitarian states resort to expanding the sphere of the politics of predation, through belligerent actions, with its more prosperous neighbors.

As libertarian journalist Frank Chodorov once wrote,

But, since the State thrives on what it expropriates, the general decline in production that it induces by its avarice foretells its own doom. Its source of income dries up. Thus, in pulling Society down it pulls itself down. Its ultimate collapse is usually occasioned by a disastrous war, but preceding that event is a history of increasing and discouraging levies on the marketplace, causing a decline in the aspirations, hopes, and self-esteem of its victims.

North Korea simply fits the bill. She simply wants to live off on a free lunch through the politics of blackmail even if the desperately poor nation knowingly can’t win a full scale war.

And only through poltical brinkmanship can she be able to extract concessions.

As the Wall Street Journal writes,

The purpose is transparently to frighten the West into concluding that there is no alternative to paying off Pyongyang, lest it sell a bomb to al Qaeda or Iran. A far better policy would be a united international effort to further isolate the Kim dynasty with a goal of regime change. Only changing the government will end the North's nuclear threat and liberate its citizens from that prison state.

Of course desperate situations can lead to desperate outcomes, something which Mr. Chodorov predicted.

Nonetheless, Bastiat was right, if goods don’t cross borders armies will. Totalitarian (or despotic) states who do not respect property rights and the rule of law will eventually collapse either from internal political strife (as a consequence of economic cataclysm) or through war.

Bottom line: North Korea is a great example how closed economies (protectionism and mercantilism) through an absolutist predatory state (totalitarianism, communism and fascism) can lead to societal failure or dystopia.

How Inflationism Leads To “Inequality”

When speaking of morality, we shouldn’t be limited to the financial markets only, but we should also parse on the political economy.

In the US, the moralists in governments, academe and media complain alot about “inequality” or the seeming dearth of redistributive policies, thinking that talking nice and romanticizing about how a true-to-life Robin Hood could become a feasible elixir to perpetual prosperity.

For these people, the nightmare of USSR’s Lenin and Stalin, Cuba’s Castro, Mao, Cambodia’s Pol Pot and North Korea’s Kim has hardly sunk in.

In addition, it seems always ok to place the burden on somebody else except oneself. Their idea for redistribution has always been anchored on “take on somebody else’s property but not mine” syndrome.

Inequality And Inflationism

Yet what is NOT being discussed is how “inequality” has ever evolved.

How inflationism has been affecting the uneven redistribution of income through the politicization of the economic process from which the political “picking of winners” through bailouts, subsidies, behest loans, guarantees, market manipulations, deficit spending, war spending, and etc., has been influencing on such disparities.

And importantly, how inflationism, channelled through the bubble cycles, has dragged the rest of the society into a quagmire as a consequence of the bust, when only a privileged few benefits during a boom.

Doug Noland accurately describes today’s dynamics[1],

``The “inflationism” intellectual and policy doctrine was instrumental in forging a historic market distortion: the perception of mortgage Credit “moneyness.” Inflationism is the root cause of the recent crisis – and a rather lengthy list of debacles throughout history. Today, the same dangerous incongruity exits that throughout history has propped up inflationism when apparent failings should have led to this dogma’s collapse: Instead of inflationism being recognized as the problem – the force behind the boom and unavoidable bust - it is instead viewed as the solution. There is today virtually universal support for policies that would incite a rapid increase in stock market and real estate prices; rising employment, incomes and spending; and a brisk economic recovery. The common view today is that the greatest risk is to fail to inflate sufficiently.” (bold highlights mine)

And it is why looking for scapegoats- such as China to hold responsibility for the “industrial wreckages” and “lost jobs/high unemployment” due to “currency manipulation”, even if the US incurred trade deficits with more than 90 countries or a “multilateral trade deficit” to quote Morgan Stanley’s Stephen Roach[2], or blaming domestic profiteers-seems very appealing and a favourite past time for moralists.

The important point is that their preferred policy approach is to “blame somebody else and take away what they have”. Yet the same moralists forget that whether World War II or French Religious War, the “us against them mentality” has been a historical recipe for disaster.

The simple truth that can’t seemingly be absorbed is that what can’t be done through trade the alternative is likely to be worst- war. As Frederic Bastiat once wrote, ``When goods don't cross borders, armies will.”

Yet the belief that the United States is impervious as a military power is likely an issue of overconfidence. As we previously noted, the US has never been so dependent on foreign or imported oil which accounts for 2/3 of US oil consumption[3]. This should also reflect on her war machines. So energy will be an X factor in case of a full blown war.

Besides, wars have also continually evolved to reflect on societal changes that the wars of the 20^th century may not be the kind of war in the future. Today’s war has evolved to “terrorism” or urban guerrilla warfare. And most likely, given the energy constrains, the nuclear option looks likely more of a realistic risk.

The Rude Awakening

The seductive tale of inflationism is mainly due to the lack of direct connection between government action and its effects to the economy.

As Thomas DiLorenzo writes[4], The so-called inflation tax is pernicious not only because it is a hidden tax on privately-held wealth, but also because it leads to false perceptions of the cause of the inflation. Political demagoguery adds to the confusion, as politicians are naturally inclined to lie to the public and blame the inflation on greedy capitalists, farmers, mortgage bankers, and others in the private sector. The proposed solution is typically to place even more power in the hands of the inflation-generating governmental authorities.”

In short it takes quite some technical sophistication to understand the linkages which can’t be easily grasped by the masses.

Yet even sophisticated people seem to fall for the illusion of prosperity from inflationism or protectionism.

Figure 3: Heritage Foundation: The 2009 Index of Dependence on Government

Recent news from the US shows how nearly half of the people don’t pay taxes (see figure 6).

According to yahoo news[5], ``About 47 percent will pay no federal income taxes at all for 2009. Either their incomes were too low, or they qualified for enough credits, deductions and exemptions to eliminate their liability. That's according to projections by the Tax Policy Center, a Washington research organization.”

This means:

One, more people are getting something for nothing. If the culture of dependency gets well entrenched, then taking away such privileges would redound to a political upheaval (secession, coup, civil war/revolution?). Overtime, the US seems more likely on path to a Greece drama.

Two, the burden of taxation will heftily increase for those paying for the privileges of the non-productive sector or for those getting something for nothing.

Three, this would only translate to further losses in productivity and possibly a shift away of capital to other countries with lesser tax burden.

Fourth, this only implies of the accelerating growth prospects in government spending.

Such degree of welfarism is simply unsustainable. If social security is deemed as unsustainable where the worker to beneficiary ratio is now 3.3 to 1, then how much more the burden of taxation where nearly are half of the population are beneficiaries?

As Milton Friedman[6] once wrote, ``Raise taxes by enough to eliminate the existing deficit and spending will go up to restore the tolerable deficit.” In short, the root of the problem is unsustainable government spending.

Fifth, given the prospects of the lack of savings and taxes to bridge finance the humongous growth of welfarism, inflationism is the most likely option.

Sixth this isn’t a problem confined to the US but to developing countries (figure 4).

Figure 4: Bank Of International Settlements: The future of public debt: prospects and implications

The BIS notes[7] that fiscal problems faced by developed nations “are bigger than suggested by official debt figures” with “public debt increasing to more than 100% of GDP, an even greater danger arises from a rapidly ageing population”.

It also sees sovereign debts are likely to suffer from higher spreads as markets face up to the risks of greater deficits and higher burden from interest payments, which will likely “drive down capital accumulation, productivity growth and long-term potential growth”.

Importantly, the “looming long-term fiscal imbalances pose significant risk to the prospects for future monetary stability. We describe two channels through which unstable debt dynamics could lead to higher inflation: direct debt monetisation, and the temptation to reduce the real value of government debt through higher inflation. Given the current institutional setting of monetary policy, both risks are clearly limited, at least for now.” (emphasis added)

Let me make a guess, developed countries will run out of ammunition or magic (Philosopher’s stone of turning lead to gold) once the next crisis resurfaces.

This means likely a back-to-back crisis which entails a bubble bust plus sovereign defaults as Harvard’s Carmen Reinhart[8] and Ken Rogoff has observed from previous experiences, ``historically, following a wave of financial crises especially in financial centers, you get a wave of defaults. You go from financial crises to sovereign debt crises. I think we’re in for a period where that kind of scenario is very likely. I don’t think a repeat of the fall of 2008 is at stake here, where it looks like the world is going to end”.

Or an even worst outcome would be a hyperinflation crisis-our Mises moment.

At the end of the day, the moralists will face a rude awakening from the laws of nature.

---

[1] Noland, Doug, Money Good; PrudentBear.com

[2] Roach, Stephen, Blaming China will not solve America’s problem, Financial Times

[3] See The Delusion Of The Mercantilist Miracle

[4] DiLorenzo, Thomas; The Subjectivist Roots of James Buchanan's Economics, Mises.org

[5] Yahoo.news, Nearly half of US households escape fed income tax

[6] Friedman, Milton, What Every American Wants, Wall Street Journal

[7] S. Cecchetti M S Mohanty and F Zampolli, The future of public debt: prospects and implications, Bank of International Settlements

[8] see Does Rising US Treasury Yields Today Suggest Sovereign Debt Concerns Or Remergent Inflation?

20th Anniversary Of The Fall Of Berlin Wall

20 years ago today marked the fall of the Berlin Wall.

Here is an article from the Bloomberg's chart of the day

(all bold highlights mine)

``The toppling of the Berlin Wall 20 years ago sparked a surge in German stocks and bonds, confounding economists who’d predicted the cost of unifying East and West Germany would stunt economic growth.

``The CHART OF THE DAY shows the benchmark DAX Index of equities and the REX Performance Index, a measure of German government bonds, since 1989. Both outperformed gold and the pan-European Dow Jones Stoxx 600 Index. The chart also shows Germany’s annual per-capita gross domestic product until the end of last year.

``The cost of unifying East and West Germany was 2 trillion euros ($2.97 trillion), according to a study by Klaus Schroeder, professor at Berlin’s Free University, published Oct. 28. Investors say that cost has paid off as the fall of Europe’s Iron Curtain boosted global trade.

“It opened up economies in Eastern Europe,” said Trudbert Merkel, manager of Deka Investment GmbH’s $5 billion Dekafonds in Frankfurt. “Germany was able to maintain its top spot in the export business and become less dependent on the U.S. The beginning of globalization helped soften the costs of the reunification.”

``The DAX has more than tripled since Nov. 9, 1989, when the East German government allowed Berliners to breach the wall that had divided their city for 28 years.'"

I would presume that economic experts, whom were allegedly baffled by the huge progress in the aftermath of the Fall of the Berlin Wall, grossly underestimated the impact of capitalism. They seem to have focused on the rebuilding and integration cost aspects rather than the potentials from unleashing the explosive force of productive capacity as consequence to embracing a market economy.

Furthermore, the lessons of the Berlin Wall is shared with the failure of the essence of communism. Professor Paul Hollander in a recent commentary at the Washington Post captures the zeitgeist,

``The failure of Soviet communism confirms that humans motivated by lofty ideals are capable of inflicting great suffering with a clear conscience. But communism's collapse also suggests that under certain conditions people can tell the difference between right and wrong. The embrace and rejection of communism correspond to the spectrum of attitudes ranging from deluded and destructive idealism to the realization that human nature precludes utopian social arrangements and that the careful balancing of ends and means is the essential precondition of creating and preserving a decent society."

The video below showcases the victory of the individual against the collective following long years of oppression. This should serve as a reminder for us to keep the torch of freedom burning. [Hat Tip: Peter Boettke]