Category: Opinion

Opinion

Deflation: The Cure to the Economic Crisis of Government

By TJ Roberts| United States

The world is sitting on the largest financial bubble ever created. While the economic elite says that we will never see another crisis in our time (just as Keynes said two years before the crash of 1929), we have been living in a bubble for more than a century, and it will inevitably break. This bubble, however, is unlike any economic boom we have dealt with before. The inflated commodity that will cause the future bust is the currency which the US Federal Government forces us to use: the US Dollar, and this is all because of the unnecessary fear of deflation.

Estimates say that as much as 98% of the value of the US Dollar has disappeared since the Federal Reserve claimed a monopoly power over currency in the United States. The only reason the Dollar has not collapsed already is due to legal tender laws, which requires businesses to deal in US Dollars within the US.

So, how did it get so bad? As alluded to in the first paragraph, it is because the government is terrified of deflation. They fear that since prices have a tendency to decrease, people will hoard their money since they can make a profit by simply refraining from spending in the present. Since consumers hold on to their money, firms earn less revenue, which causes them to decrease their spending. This leads to a decrease in employment, and therefore production. With this loss of production, those who make the factors of production also lose revenue, leading them to cut spending, thus decreasing production and employment. With the loss of employment, consumers spend even less. This ultimately leads to a complete collapse of the economy according to the Keynesians (see Chapter 12 of John Maynard Keynes’s The General Theory of Employment, Interest, and Money).

Deflationary Spiral will not destroy the economy

The process outlined in the prior paragraph is known as a “deflationary spiral,” in which deflation causes the entire economy to disappear. This, however, is an economic myth. In truth, a deflationary spiral can only occur under special circumstances. The reason why Keynes is wrong in assuming a deflationary spiral will happen is two-fold.

First, it is not possible for human beings to reduce spending externally. Although money does possess deflationary tendencies when unregulated, this does not mean that people will hoard their money indefinitely. Humans have basic needs, namely food, water, and housing. It simply isn’t possible for the people to cease all forms of economic activity.

The second reason why a deflationary spiral will not destroy an economy is time preference. Time preference is the concept that human beings prefer present goods to future goods. If one offered you one thousand dollars today or one thousand dollars in one month, people will typically take the money today. This is why we have an interest in society. Interest gives an incentive for one to refrain from present consumption so that they may have even more future consumption.

People, however, have varying degrees of time preference. The lower your time preference is, the more willing you are to forego present consumption for future consumption. Simply because something is cheaper in the future does not guarantee that someone will wait to consume it. If the price drop is high enough, then they will wait, but that only applies to those with low enough time preferences to be willing to wait. Those with higher degrees of time preference will still consume and the economy will not totally disappear.

What are the causes of deflation?

There are four immediate causes of deflation.

  1. An increase in the demand for money will cause deflation. If the demand for money increases relative to the demand for goods, then price deflation will occur. Money will have an increased purchasing power due to the increased demand for money.
  2. A decrease in the supply of money will lead to price deflation. If less money is in the system, then people will marginally value money more than goods. Simply put, with less money in the system, people will be able to purchase more goods for less money.
  3. A decrease in the demand for goods. If the demand for goods decreases relative to the demand for money, then money becomes more valuable and deflation occurs.
  4. An increase in aggregate output. In other words, an increase in the supply of goods will cause price deflation because production has become more efficient.

The commonality among these causes is that it leads to the decrease in the price of goods.

Deflation is caused by economic growth

The fourth cause of deflation, an increase in aggregate output, is simply economic growth. Economic growth, in fact, is inherently deflationary. When the people can afford more for less, there is growth. This compels more production, more innovation, and more prosperity, especially among the lower classes.

The only examples in which economic growth was not deflationary was in times of war. In times of war, the State forces an increase in production through inflationary policies that allow the government to “afford” these wars. This inflation, of course, always leads to a bust in the future.

Inflationary growth is unsustainable.

Under inflationary growth, the government utilizes their power to dictate the devaluation of their currencies. This leads to vast misallocations of resources. By devaluing the currencies, governments redistribute wealth to political entrepreneurs who position themselves to receive money straight from the printing press. Major banks and corporations are among the most prone to doing this.

The growth these firms experience, however, is vastly unsustainable, whereas it is built upon wealth that did not exist in the first place. In true growth, firms cut their costs in order to produce more efficiently and maximize their profits. Under inflation, however, the exact opposite happens. An inflationary monetary policy, especially one based on a fiat currency in a system that tolerates fractional reserve banking, will lead to a boom that must be corrected.

The idea that inflationary policies can lead to growth in the short run is just another example of the broken window fallacy. As mentioned before, political entrepreneurs who receive money straight from government printers benefit, but those who are not politically connected suffer since they cannot pay the higher wages and other costs. This leads to unnatural growth at the expense of others.

Inflation is fraud.

When the government implements a fiat system, they have the ability to manipulate the currency to deceive the masses into believing out economic condition is better than what it really is.

deflation vs inflation
Annual inflation (in blue) and deflation (in green) rates in the United States from 1666 to 2004.

Fractional Reserve Banking

Perhaps the most egregious form of inflationary fraud is fractional reserve banking (FRB). FRB is a system in which banks loan out the deposits of its customers, keeping only a fraction of their nominal reserves in the bank. This leads to unnaturally low-interest rates and thus high levels of debt.

If a shock in the economy occurs, bank runs will happen. When it comes out that the bank can’t give its customers their money, the bank goes under (or gets bailed out due to government intervention), and the people lose everything.

FRB is a clear instance of fraud in which a bank claims to have more money than it truly has. It is loaning out its customers’ funds, leading to credit expansion, which leads to business cycles.

Of course, we can dodge this by returning to the gold standard and punishing those who partake in fractional reserve banking.

Deflationary Spiral punishes parasitic frauds.

Inflation must come down eventually. And the only way to do that is through deflation. This is not to be feared but celebrated. It is the market’s way of correcting the malinvestments caused by government manipulation of money. Deflation is a means by which the economy returns to the real world. In addition, it halts the centralization of power under governments that have cartelized the monetary system of their nations.

Firms that are deeply in debt, which have certainly taken advantage of the fraudulent fiat and fractional reserve banking systems, will go under. The power elites of the State will be humbled as they will lose the foundation on which they rested. Deflation purges our society of the parasites and frauds that have been manipulating the economy to their advantage since 1913. By this, of course, I mean the central planners and political entrepreneurs who have propped up the Federal Reserve and the federal government. For they have delayed deflation for more than a century. For liberty and prosperity to return, we must have a deflationary spiral to rid us of the wealth that the State holds, which never existed, to begin with.


Originally published on freedomandeconomics.org.

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Progressive Commentator Praises Rand Paul, Criticizes Bernie Sanders on Russian Collusion

Kenneth Casey | United States

Last Thursday, Independent Senator from Vermont Bernie Sanders introduced a resolution in the Senate that would according to him “accept the assessment of the United States intelligence community with regard to interference by the Russian Federation in our election”, “protect the election systems of the United States from interference by the Russian Federation”, “demand that the Sanctions enacted against the Russian Federation be fully implemented”, “will not accept interference with the ongoing investigation of Special Counsel Robert Mueller”, and “declares that the president must cooperate with the investigation”.

Rand Paul declared enthusiastic opposition to the resolution on the Senate floor, declaring “The hatred for the president is so intense, that partisans would rather risk war than give diplomacy a chance”, citing President Reagan sitting down with Gorbachev to lessen nuclear tensions as a prime example. He made it clear he was not defending Russia’s involvement in our elections, but he would “rather that we still have open channels of discussion with the Russians”. Rand is echoing the position his father Ron Paul shares on sanctions and has been vocal on for many years: Sanctions are an act of war, and diplomacy is always much preferred.

You would think that Bernie being the anti-war progressive that he is would take a position similar to Rand’s, to prevent war at all cost with Russia and oppose the sanctions. Instead, he naively stated that his resolution had nothing to do with curtailing relations with Russia, which is factually incorrect considering his resolution calls for enforcement of sanctions against Russia, and sanctions are enacted in order to express displeasure with a country.

Bernie Sanders’s resolution and statements regarding Russia received criticism from well-known, highly-regarded progressive commentator Kyle Kulinski on Tuesday. Kyle, who is the host of Secular Talk on YouTube, an affiliate of the far-left online news organization The Young Turks, made a video on his YouTube channel regarding Paul’s and Sanders’ back and forth on the resolution, asserting “hope you’re sitting for this one, Rand Paul is right and Bernie is wrong.”, and goes on to point out the hypocrisy that Bernie openly admits the resolution increases sanctions, and “acts like that’s not an escalation of tensions”. He goes on to say Rand’s statement that this round of sanctions is “hyperbolic”, but that it’s “definitely the direction that it’s going in”, and criticizes the denseness in Bernie’s statement “Who’s against Diplomacy? Nobody is.” which was a response the Senator gave to Rand Paul when he pointed out the bill damages diplomacy. “Really Bernie? Really? You’re acting like there aren’t people who are against diplomacy when every time Trump sits down with Putin there are screams of he’s doing treason and he’s a traitor?”

Kyle is by no means a libertarian. He endorsed Bernie Sanders in the 2016 presidential election, supports Medicare for all, a $15 minimum wage, protectionism in trade, and even helped with the founding of a group that was key to Alexandria Ocasio-Cortez’s primary victory in New York. However, he’s been one of the few progressives to point out that Bernie is wrong on the issue of sanctions on Russia and it’s incompatible with the anti-war position held by progressives. He even went at it with The Young Turks founder and host Cenk Uygur on Twitter, stating Cenk was “prodding Trump to be more hawkish on Russia” after Cenk had complained that Trump noticeably used harsh language on Iran but not Russia.

Kyle has been one of the few commentators from the left that has not become convinced that Trump concluded with the Russians in the 2016 election, and thinks that Democrats should focus on actual issues rather than a talking point with zero policy substance. Although I disagree with Kyle on a lot of issues, I admire the fact he’s consistent with his principles and views on policy when so little few others do as such.

There’s no doubt that the “issue” of Russia interference in our election has been one of biggest talking points in the American political landscape ever since President Trump was elected in November of 2016. The dialogue regarding the issue arguably reached its apex in the aftermath of the 2018 Russia–United States summit in which President Trump met with President Putin of Russia, which occurred on July 16th.

Establishment Republicans and neoconservatives shared pretty much the same view as corporatist Democrats regarding Russia. They all want tougher action and less effort towards diplomacy. John McCain called it “One of the most disgraceful performances by an American President in my memory”. You can also take a recent bill introduced by neoconservative Lindsey Graham and corporatist Democrat Bob Menendez on the Senate floor as an example. The proposed bill would slap new sanctions onto Russia, targeting their “debt and energy and financial sectors”. Some notable senators to come out in favor of the bill include Republicans Bob Corker, Marco Rubio, Mitch McConnell, and Democrat Chris Van Hollen.

This proposed bill would add onto the U.S. sanctions on Russia that overwhelmingly passed Congress in July of 2017 and was ultimately signed into law by President Trump (although he did send out a tweet in opposition to the sanctions in 2017, but even if he were to veto it, Congress had enough votes in favor to override the president’s veto). The bill only received five Nay votes in the Senate and House combined: 4 from libertarian-leaning Republicans Senator Rand Paul and Representatives Justin Amash, Thomas Massie and John Duncan; and one from an Independent Senator: Bernie Sanders.

Yes, the same Bernie Sanders that introduced a resolution in the Senate that would enforce the previously “overwhelmingly passed sanctions against Russia” was one of 5 Congressmen to vote against the sanctions in the first place. Welcome to Washington, folks.

In Bernie’s defense, he did say at the time of his vote against the sanctions he would support individual sanctions against Russia, but the thing that doesn’t make sense to me is that his reasoning for opposing the sanctions was it included additional sanctions against Iran and North Korea, and he thought that America should play a more “even-handed-approach” in the Middle East and be less reactionary in our policy towards Iran. Why doesn’t he apply the same logic towards Russian sanctions? That doesn’t make a whole lot of sense to me.

With so little non-interventionist and anti-sanction advocates in Congress, it’s really good to see Rand Paul step up and be a leader on the issues.


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Gun Control Dies on August 1

By Mason Mohon | United States

Technology has always been a glorious liberator. The internet meant that the state could no longer hide the terrible things they do from the watching public. Bitcoin and cryptocurrency have allowed people to make exchanges without using the notes issued by the dangerous Federal Reserve. Blockchain technology means we can safely store truth immutably without a centralized force. The newest addition to this list of technological liberators is 3d printed guns.

Cody Wilson, a native of Austin, Texas and UT law student, may have very well provided us with the most surefire defense from the state that we will ever need. Wilson released the blueprints for his 3D printable guns in 2013. Shortly after his single shot firearm “the Liberator” was released, the state department ordered that he take the blueprints off the internet.

Since then, he has been in a lawsuit, but the Trump administration decided to settle the matter. On August first the files of the gun building blueprints will be available on defdest.org.

This is not Wilson’s only project in the world of untraceable guns. His “Ghost Gunner” kit allows for users to create 80% of a firearm without any sort of serial number. Without any prior CNC (computer numeral control) knowledge, consumers of this product can “legally manufacture unserialized rifles and pistols in the comfort and privacy of home.”

Wilson recognizes the magnitude of this lawsuit’s settlement, tweeting a picture of a gravestone with the words “American Gun Control” on it:

Anyone with the right machine and materials will be capable of manufacturing complete and effective firearms from their own computers come August. This has sparked fear and outrage from advocates of gun control:

Firearms are a major line of defense against government tyranny and local crime. A government facing an armed population would not dare tread on liberties. The founders put the Second Amendment into the constitution so we could shoot at the state’s goons if we were fed up with their tyranny.

On August 1, guns will be much easier to produce. They will no longer fall victim to the tyranny of governments and corporations. Once these schematics are released, download them and save them in case the hand of state censorship pounds down once again. And go ahead and build yourself a gun.


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US, Russia, and China Relations – Part 2

By Joshua D. Glawson | United States

US-China Relations: China has many trading partners; the US is the largest. As of recently, Trump has proposed possible tariffs to be added to imports from China into the US, which could hurt relations between the two. However, China does hold a significant amount of US Treasury debt, in fact they hold the most for outside of the US countries. This is to say that each of these countries has a significant financial incentive to maintain good relations, yet according to the Cato Institute, there is no formal Fair Trade Agreement between the two.

A Free Trade Agreement (FTA) is necessary between US and China in order to better relations and trades. This comprehensive set of rules will give confidence to business, especially in areas of intellectual property and technology transfer. China is notorious for not keeping strong regulations on Chinese companies infringing on copyrights and IP. The same FTA could be a good step forward with Russia as well, but many in the US are in fear of Russia becoming more powerful if that were to happen. Nevertheless, contrary to what some believe, free trade benefits the citizenry more than it would the governments’ political elite.

MIT stated, “In 2016 China exported $2.27T, making it the largest exporter in the world. During the last five years, the exports of China have increased at an annualized rate of 1.7%, from $2.04T in 2011 to $2.27T in 2016.” Whereas, “In 2016 China imported $1.23T, making it the 2nd largest importer in the world. During the last five years, the imports of China have decreased at an annualized rate of -2.8%, from $1.39T in 2011 to $1.23T in 2016. The most recent imports are led by Crude Petroleum which represents 8.25% of the total imports of China.” In 2016, the US imported from China around $436B in goods and exported around $122B in goods to China.

The Chinese have ramped up their militarization and continue to press forward into the South China Sea, against the wishes of the UN, the US, and other Western countries. Along with this growth of regional military presence, the US is equally showing a presence in the Sea as a means to attempt to thwart further possible aggression by the Chinese. So, economically, China and the US are tied together in a seemingly eternal marriage of trade, but when it comes to regional hegemony the two clash when it comes to determining who has legitimate authority and power.

This rising tension further perpetuates the idea that an FTA may help ease the stress between the two. Yet, China’s Communist President Xi Jinping has also pushed his Asian continental series of high-speed railways in what he has called “The One Belt, One Road, Initiative.” According to a report at Axios, this is still a part of the Chinese Navy’s military budget and growth, estimated anywhere between $4T and $8T, likened to a modern Silk Road.

Chinese-Russian Relations: China is Russia’s biggest source of import and export. As of 2016, Russia imported around $35.5B from China and exported nearly $30.3B to China. The two, although they share a border, have not had a longstanding good relationship, since the US has increased the US military presence in the Asian Pacific and along the waters of China and Russia, China and Russia have increased cooperation in military drills as a means to show comradery against the US hegemony.

Not only has US military presence irked Russia and China alike, but the US’ threats of tariffs on Chinese goods without an FTA could potentially lead to worsening relations between the US and China while strengthening those between China and Russia. Equally, the economic sanctions on Russia by the US, are probably inadvertently assisting the relations between China and Russia since China is now Russia’s biggest importer and exporter. If indeed it is verified on all levels that Russia mingled in the 2016 US Presidential elections, that could ensure severed ties between the US and Russia, providing more reason for Russia to join forces with China.

Both China and Russia have worked together in the past. Not only are they regionally close, but politically they are far more similar than the US is with either one of them. The Soviets joined China to fight against the Americans in both the Vietnam and Korean wars. The Chinese also joined the Americans to fight the Soviets in Afghanistan, showing the complexity of their relations.

Concluding Statements: The timidly fluid relations among the US, China, and Russia, has been economically lucrative while concurrently the escalating militarization of each of these States has brought the world to attention over the fear of a potential World War far more catastrophic than any in the past. While China is gaining economically, some of their exploitations of trade tariffs and their expansion of military may become their Achilles heel.

As for Russia, sanctions against them only help benefit the elite, while hurting the country overall. The best bet to ensure bettered relations between the US and Russia is by setting up a secure FTA. An FTA should also be established with China in order to maintain good economic and political relations between the US and China. It would then behoove Russia and China to follow suit. The ongoing lingering force of the US military around the world will surely be one of the US’ downfalls, as it blatantly instigates and infuriates countries all over, but it absolutely frustrates both Russia and China especially within their own regions.

The sure way to peace is the age-old tale of continuing in free trade, having Justice systems that provide equality under the law and cease the prowess of global military might or dominance. Countries that normalize positive trade relations between one another will find that the economic incentive is far more valuable than the harms caused by going to war with one another.

Likened to a parable, wars between butchers and candlestick makers leave the town with tarnished knives and a lack of light; but if the butcher and candlestick maker agree to trade instead of fight, their steel is strengthened and their lights shine brightest.


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Non-Intervention is the Only Foreign Policy That Puts America First

By Jack Parkos | United States

When a man says “family first” he will reschedule meetings to make time for his family. When a Christian says “God First” they make room for church on Sunday. What does a politician do when he or she says “America First”? Well not exactly that. Whether enacted by a Democrat or Republican, whether through foreign aid, warfare or global institutions, our foreign policy hasn’t been putting America first. Yet the people in charge claim it does.

Our policy has favored global institutions controlling power, decades of constant warfare, and maintaining an empire overseas. This approach costs countless lives and millions of dollars in resources. This is all based on the rhetoric that America has some sort of responsibility  to “Spread democracy” around the world (which is ironic considering we aren’t even a democracy). Partner this with the military industrial complex and some elitism and you have a policy that has put other nations ahead of America.

Ironically it seems the people who scream the loudest about putting America first do so the least. Both parties are guilty. The rise of Neo-Conservatism has plagued both parties. Even President Obama, who won the Nobel Peace Prize in 2009, dropped over 26,000 bombs a year in the Middle East. They always spread the lie that intervention is for security reasons and puts America first and keeps us safe. I don’t understand how rigging elections and installing puppet regimes keeps me safe. It only creates enemies.

Russia has been accused of hacking our elections and although we don’t even know if it changed the outcome or really even what happened, people are furious. So imagine how mad people get when the CIA does this to their elections. We have made a new enemy. And this enemy is now against America. Making enemies doesn’t put America first. Our government making enemies for us is cruel. If we minded our own business, we’d be a lot better off. Does this mean all nations will love America? No, but we would have less groups that hate us.

Civil Wars happen, America even had one. This doesn’t mean we need to intervene. In the American Civil War, the CSA hoped the British and French would send troops to help it defeat the Union. They did not. Why? Because they knew it may start a war between the US and Britain. Britain put their country and there people first. This seems very reasonable. Why does America not apply this policy? If we see a Civil War erupt many miles away across the ocean, we don’t have to intervene. This doesn’t help us.

Whoever is in charge of some country in the Middle East doesn’t harm your average American. But intervening will. War has great costs. Since 2001 America has spent 5.6 trillion dollars on wars in the Middle East. And you know who gets sent the bill? American citizens. Even worse than the great financial loss is the loss of life. America first means putting American citizens first. This should include our military. Sadly, our government hasn’t felt that way.

Imagine a mother getting the call her son was killed halfway across the world, she even was forced to pay for this war. Once the war is done, nothing changes. We are no safer. We were likely never in danger. It is simply immoral and wrong to ask people to send their sons to a place they don’t know, to fight for old men in suits, and then demand the bill be paid. Our military should be a defensive one used to protect the people and put the country first, not for intervention. This will put the American people first and truly keep us safer.

You may think we have a moral responsibility to intervene, because perhaps the regime is a tyrannical one. There are several issues with this idea. The first is that the people calling to intervene are calling for others to do it. Politicians in D.C. won’t be doing any of the fighting themselves. Further, when we elect representatives there job is to represent the American people. They don’t represent Israel, Palestine, Syria, or any other country. It simply isn’t their job to represent the rest of the world. Intervention is also bound to put us in a bind when it comes to our relationship with allies. When our allies commit an atrocity do we need to intervene?

The war hawk will say our allies would never, and that even if they did we would help. This is not true. We all remember Trump launching missiles into Syria after news of a gas attack. Meanwhile in the Israel-Palestine conflict, where both sides have committed war crimes, we side with Israel and ignore there harm perpetrated by Israel. This is simply outrageous and proves that Neo-conservatives have no principles. They will gladly intervene off of claims in Syria, but turn the other cheek when Israel commits atrocities. Do they really want to bring world peace or do they just want to benefit certain groups? It appears to be the latter, and the American people is not one of the groups benefited by this.

So what foreign policy will truly put America first? A policy that protects Americans and doesn’t harm the economy. Non-intervention is the only policy that does this. This would include restricting our military to a defensive role, allowing for free trade, and not meddling in the affairs of other countries. This would reduce both spending and casualties. We also should set the example to the world of what a free and prosperous country is like.  But to do so, we first must become a free and prosperous country again. A major way we can do this is adopt the non-intervention foreign policy. If we want to put America ahead of everything else, perhaps we should put peaceful talks ahead of bombs. Intervention has not worked. It is time to try non intervention-the policy that promotes peace and prosperity.


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