Liberty & Power: Group Blog
Jane S. Shaw
Wall Street may have had its collective head in the sand and it certainly reaped where it did not sow, but far worse than Wall Street's evils is for the government to dictate what can and cannot be paid in compensation.
Okay, the government already does that with the minimum wage, and the government obtained power over Wall Street because it "rescued" some of those companies. (In some cases, Henry Paulson forced them to submit, in a scene reminiscent of, oh, say, Henry VIII forcing Thomas More to cede power. Thomas More didn't, and he was murdered.)
Even liberals despise the term "dictator" but they are apparently happy when their government is a dictator.
It's funny -- I remember reading long ago a shocked reaction to John F. Kennedy's successful effort to "persuade" steel companies to hold down their prices. I was a liberal back then (and very young!) and I couldn't understand the negative reaction, as if this was some kind of precursor to greater government power. Of course, we have seen that greater government power, from Nixon's wage-and-price controls to today's unprecedented interventions.
Intervention is just a part of the scene now (even though, I just read, Nixon said in his autobiography that wage-and-price controls were a mistake). We learn, but we learn too late. And the learning today is at the kindergarten level.
Jeffrey Rogers Hummel
One of the more persistent fallacies credits fiscal policy during World War II with ending the Great Depression. Genuine fiscal policy, of course, requires an increase in government borrowing, either by the government spending more, taxing less, or doing both. By that standard, as the classic 1956 article by E. Cary Brown demonstrated, neither Presidents Hoover nor Roosevelt conducted much in the way of fiscal policy prior to the war. Both were believers in balanced budgets, and so strived to accompany their expenditure increases with tax increases. Indeed, their most serious peacetime deficits resulted from congressionally enacted veterans’ benefits that they both resisted.
So why did U.S. involvement with World War II seemingly end the depression? Two reasons: (1) The draft conscripted 22 percent of the prewar labor force. Forcing people to work at low wage, high-risk jobs can always reduce unemployment, which is why slave societies never face an unemployment problem.
(2) Monetary policy accommodated the huge increases in government borrowing during World War II. By pegging the interest rate on Treasuries at very low rates (2.5 percent for T-bonds, and 0.375 percent for T-bills), the Fed automatically monetized the debt. The money stock nearly tripled with the result that seigniorage covered almost one fourth of the war’s cost. That is the highest seigniorage percentage for any U.S. war outside of the two hyperinflations: the American Revolution and the Confederacy. In other words, what looked like fiscal policy was really monetary policy in disguise.
And even then, the only reason monetary policy was effective at raising output was because it drove prices and wages above Hoover’s and Roosevelt’s explicit and implicit floors. Murray Rothbard was the first to emphasize the detrimental impact of these price and wage floors in America’s Great Depression (1963), followed by Richard Vedder and Lowell Gallaway in Out of Work (1993), but now with the work of Harold Cole and Lee Ohanian, this realization has gained mainstream respectability among economists.
Moreover, Bob Higgs has pointed out that, although World War II coincided with an increase in U.S. output, most of that output went into war production rather than enhancing well being. If you look at real consumption per capita, and adjust for wartime controls, there was not much improvement until the end of the war. Which leads to what in my opinion is devastating historical evidence against fiscal policy. The enormous decrease in government spending after World War II, followed by four years of surplus and a nearly 50 percent fall in the national debt as a percent of GDP, constitutes the most contractionary fiscal policy in all of U.S. history, another observation you can find in Vedder and Gallaway. If Keynesian theory were correct, there should have been a massive depression, which is what nearly all economists were predicting at the time. But the demobilization saw no real recession or significant unemployment.
Japan’s lost decade is often cited as an example of monetary policy’s ineffectiveness. Be that as it may, the Japanese also tried fiscal policy throughout the decade with no discernable benefits. In fact, there is no really good empirical evidence for the effectiveness of fiscal policy, as Tyler Cowen, among others, has reminded us repeatedly on his blog, Marginal Revolution. The econometric studies are all over the map. Some have even recently found that tax cuts have far greater multipliers than expenditure increases, in outright contradiction of Keynesian theory. Other studies get high multipliers only by assuming the debt is automatically monetized. For example, more than half the stronger multipliers in Greg Mankiw’s popular intermediate macro text are the result of accommodating monetary policy.
My best guess is that the expenditure multiplier from pure fiscal policy is probably close to zero or, if you consider supply-side effects, possibly negative. But this cuts both ways. I believe that the tax multiplier is also close to zero. Any justification for tax cuts depends on their supply-side, not demand-side, effects. This goes as well for all the interminable debates about how the government spends the stimulus.
In short, Obama’s stimulus package is simply a “Hail Mary” pass. As John Cochrane of the University of Chicago has aptly put it in his recent critique of fiscal stimulus, “public prayer would work better and cost a lot less.” If the American people are lucky, the stimulus will merely be ineffectual. If not, it will make matters worse. Counter-productive government intervention under Bush has already turned a relatively minor recession into something nearly as bad as the recession of 1982. Any further deterioration will increase the clamor for still more disastrous government intervention. The only positive thing I can say about the stimulus package is that, by driving up the U.S. government debt, it will probably bring about a Treasury default much sooner than otherwise.
Jeffrey Rogers Hummel
Jane S. Shaw
Leef: Would you suggest the three best books for someone – President Obama, Governor Perdue, a soccer mom, a college student, Joe the Plumber or anyone else – to read for a good start on understanding economics?
Todd Buchholz, New Ideas from Dead Economists
Paul Heyne, The Economic Way of Thinking
Burton Malkiel, A Random Walk Down Wall Street And, the SINGLE best, ONE thing to read is: Leonard Read’s essay"I, Pencil."
Jane S. Shaw
Ford’s approach to inflation was WIN (“Whip Inflation Now”) buttons, which were silly, perhaps, but much better than the wage-and-price controls of his predecessor. I am told that he vetoed more bills than any other president since Dwight D. Eisenhower--many of them big spending bills pushed by the Democratic majority in Congress. And although he was a congressman for 25 years, he never wrote a major bill.
Ford pardoned Nixon, which lost him re-election but ended what could have been a long, bitter, and divisive perpetuation of the “hate-Nixon” mood. When Ford died, even Ted Kennedy and the New York Times agreed that his pardon was the right decision.
I was always sorry that he hadn’t coupled the pardon with amnesty for Vietnam objectors. It would have helped to ease the pain caused by the previous decade and it might have won him re-election.
David T. Beito
Jane S. Shaw
As I dug around, I must admit I was rather astounded by what I found in terms of his ideas as well as by the importance conferred upon him by his generation. To my mind, history should never have forgotten him, and we would do well to remember him and what he wrote. Indeed, the German shell that took his life in the early autumn of 1917 might have changed a considerable part of the twentieth century by removing Hulme from it.
Eliot, certainly one of the greatest of twentieth-century men, understood the importance of Hulme in 1924. Eliot saw him as the new man—the twentieth-century man. In April 1924, he wrote: “When Hulme was killed in Flanders in 1917 . . . he was known to a few people as a brilliant talker, a brilliant amateur of metaphysics, and the author of two or three of the most beautiful short poems in the language. In this volume [the posthumous Speculations, edited by Herbert Read] he appears as the forerunner of a new attitude of mind, which should be the twentieth-century mind, if the twentieth century is to have a mind of its own.” Hulme is “classical, reactionary, and revolutionary; he is the antipodes of the eclectic, tolerant, and democratic mind of the end of the last century . . . . A new classical age will be reached when the dogma. . . of the critic is so modified by contact with creative writing, and when the creative writers are so permeated by the new dogma, that a state of equilibrium is reached. For what is meant by a classical moment in literature is surely a moment of stasis, when the creative impulse finds a form which satisfies the best intellect of the time, a moment when a type is produced.” Eliot continued to praise Hulme in his private letters. In one, he stated bluntly to Allen Tate, “Hulme has influenced me enormously.” In another, Eliot claimed Hulme to be “the most remarkable theologian of my generation.” Historian Christopher Dawson believed that Hulme, almost alone in his generation, understood the dangers of progressivism: “The essentially transitory character of the humanist culture has been obscured by the dominance of the belief in Progress and by the shallow and dogmatic optimism which characterized nineteenth-century Liberalism. It was only an exceptionally original mind, like that of the late T.E. Hulme, that could free itself from the influence of Liberal dogma and recognize the sign of the times—the passing of the ideals that had dominated European civilization for four centuries, and the dawn of a new order.” A writer in the New York Times in 1960 summed up Hulme’s influence nicely: “T.E. Hulme had modified the consciousness of his age in such a way that by 1939 his name had become part of a myth.” Hulme, from all accounts, possessed a rather powerful personality, able to form communities of thought and art around himself. Most credit Hulme with founding Imagist poetry. Here’s one of Hulme’s 1909 poem, entitled “AUTUMN” “A touch of cold in the Autumn night— I walked abroad, And saw the ruddy moon lean over a hedge Like a red-faced farmer. I did not stop to speak, but nodded, And round about were the wistful stars With white faces like town children.” While this poem doesn’t strike me as anything profound in terms of its theme (though, maybe I’ve not spent enough time with it), I can readily see its influence on the work of Eliot. Could Eliot have produced The Wasteland, The Hollow Men, or the Four Quartets without the influence of Hulme and the school of poetry he founded? The Four Quartets is arguably the greatest work of art of the twentieth century. If for no other reason, I’m truly thankful Hulme contributed what he did simply in offering this new form of poetry. Like Eliot, Hulme adopted and accepted modernist forms of art while rejecting the meaning and essence of modernity. In one of his most powerful essays, defining the nature of humanism, properly understood, Hulme argued that all scholarship and art must begin with the premise (fact) of original sin. “What is important, is what nobody seems to realise--the dogmas like that of Original Sin, which are the closest expression of the categories of the religious attitude. That man is in no sense perfect but a wretched creature who can yet apprehend perfection.” Rousseauvian/enlightenment thinking had moved society away from understanding this fundamental truth of the human person. As Hulme saw it, Rousseauvianism is a “heresy, a mistaken adoption of false conceptions.” By focusing on feelings and individual desires and blind lusts (and glorifying them) it attempts to allow man to become a God—and, as a result, “creates a bastard conception of Personality.” The human person only overcomes his depravity though heroic virtue, Hulme argued: “From the pessimistic conception of man comes naturally the heroic task requiring heroic qualities. . . virtues which are not likely to flourish on the soil of a rational and skeptical ethic. This regeneration can, on the contrary, only be brought about and only be maintained by actions springing from an ethic which from the narrow rationalist standpoint is irrational being not relative, but absolute.” When Hulme received a commission in the British Army during the Great War, he embraced what he had preached, and he gave his life as a patriot of western civilization. If only Hulme’s mind—per Eliot’s wishful thinking in 1924—had become the “twentieth-century mind.” We might very well have avoided a world immersed in ideological terror on one side and in flabby citizens demanding stimulus packages on the other. http://web.me.com/bradleybirzer/Site/Stormfields%3A_The_Occasional_Blog/Entries/2009/2/26_T.E._Hulme_(1883-1917).html
Jeffrey Rogers Hummel
There have been many comparisons of late between the present Crisis in Karl Rove’s Beloved "American Empire,” and that which impacted Rome starting some two millennia ago.
One of the great theatrical aspects of the Roman Circuses, along with Chariot Races, Gladiators, and other spectacles, was the killing of various animals, especially Bulls. In various and ongoing financial crises that repeatedly afflicted the Empire, the Emperors, ever acutely aware of Roman Populism, placed Circuses over even food as a priority in the Welfare programs for the masses.
In the records of such Circuses, it appears in one year, in one such Circus alone in one province, they managed to kill 6,000 Bulls. Such prime meat did not go to waste! Raffles were held beforehand so that after the Bull was slaughtered, he could be roasted for one of those famous extended Chariot Tail-gate Parties held outside of a coliseum. It has even been rumored that a famous rancher from Western Rome, one Dubyius Bushius, had the secret recipe to the barbeque sauce monopoly for the barrels of sauce necessary for such orgies!
Today, in the person and testimony before the Congress of Corporate Executives such as Edward Liddy, CEO of AIG, we have a modern version of one of those Roman Bulls, until recently extolling the virtues of Wall Street, even in the face of insider evidence of a virtual collapse of a system said to be, “too big to be allowed to fail.” Can’t we, in true Roman style, auction off the opportunities to the populace to be among the first to slaughter one of these pompous Bulls (not from Pamplona), but rather Washington DC bureaucrats and politicians, and/or Wall St. moguls, who are among those responsible for this mess, and further hyped to us by the Corporate Media?
After all, what this country really needs is a really Good Circus, on the Roman Model! Many Americans are already tiring of President Obama’s continued apologies and explanations.
David T. Beito
Roderick T. Long
[cross-posted at Austro-Athenian Empire]
Apparently popular opposition to the bailout may help to kickstart the perpetually-approaching-but-never-arriving Atlas Shrugged movie, which is now being pitched as an anti-bailout movie. (Conical hat tip to Stephan Kinsella.)
That makes a fair bit of sense; for while both its critics (recently, e.g., Stephen Colbert) and its fans (recently, e.g., the loony Objectivist anti-tipping movement) have often read the book as championing the capitalist class against the proletariat, it actually champions the productive (in both classes) against the parasitic (in both classes); several of the books chief villains most notably James Taggart and Orren Boyle are wealthy industrialists who are eager lobbyists for special government privileges; and one of Dagnys chief battles is against regulators who are trying to do her company (well, her brothers company) a favour by putting its rivals out of business. So its really an anti-corporatist novel. (Thats not to say that Atlas isnt still open to criticism from a left-libertarian perspective; sure it is, in various ways. But thats another story.) So the present political climate would indeed be a great time for the movie.
Another factor moving the project forward is the need to start production before the rights revert to the Rand estate. Thats a major desideratum, since these days the estate probably wouldnt approve any film version unless Galts Gulch was represented as being ringed by thousands of severed Muslim heads on pikes.
Evidently casting ideas for Dagny are now extending beyond Angelina Jolie, which is probably a good thing too. Jolies involvement was a plus to the extent that it made the film likelier to get made, but she never struck me as the right type for the role. Others being considered include Charlize Theron (whose name was once assigned to another never-produced Rand film project, The Husband I Bought), Anne Hathaway, and Julia Roberts none of whom seem quite right either (though I think I could be persuaded re Roberts; Ill wait until I see Duplicity to decide).
These require a substantive response, which I make below. My initial comment is numbered and italicized, followed by his comment, and then my “Response.”
1) Rand's science fiction is another piece of fantasy for"outraged" Americans who don't want to face the real world, or deal with it.
Are you saying that a work has to be realistic in order to be relevant to the real world? Why? What about metaphor?
Resposnse: No, a work does not have to be realistic in order to be relevant to the real world. In a world increasingly characterized by Empires, I have long thought that Satire is perhaps the best approach to this Centralization of power as Oswald Spengler characterized it.
Metaphor also has its place, but one might hope that it is carried off with some accuracy. Is this case, with the novel in question?
In mythology, Atlas has been punished by having to hold up the Heavens. Wikopedia comments that many people make the error that he is holding the Earth on his shoulders. Miss Rand appears to have been one of these, since her novel is clearly about events here on Earth, and not about events in Heaven, a place about which she appears to have been in denial.
Is it too much to ask, Rod, that a Metaphor, if applied, be used with some degree of accuracy?
2) In the book, Galt never produces the promised machine to stop the world. He simply convinces a few people to drop out.
Well, crucial people on whom the dying economy has come to depend. And anyway, it's a metaphor for the fact that state power rests on the acquiescence of the ruled and exploited.
Response: I suppose its natural for a Philosopher to see a Philsopher as someone upon whom the Economy depends. But, do you really believe the few people Galt convinces were all that essential to the Economy? Perhaps the most important, Hank Reardon, does not do so until near the end of the book.
I notice, in again introducing Metaphor, that you simply skip over my observation that Rand/Galt never produces his so-called machine to stop the engine of the World. The key, in my view, to coming close to stopping the engine of the world, is Decentralized, and virtually free, Electricity. as was envisaged by real creators over a century ago, such as Nikola Tesla, before J.P. Morgan and others Centralized it. We are still in that reactionary paradigm today, but there are forces now seeking to break that monopoly of power which made something like Enron possible only a few years ago. The Marina-Huerta Educational Foundation, of which I am Executive Director, is dedicated to a Decentralized, Sustainable, Affordable lifestyle, and is actively working with some of the inventors of a forthcoming Energy Exchange Machine which might put even the new, advanced solar panels in the shade!
Further, State Power rests on much more than a Metaphor that “rests on the acquiescence of the ruled and exploited.”
More than in other Empires such as Rome, the Media, Corporations and the Political Parties make a mockery of the notion of Democracy and the acquiescence of the mass of the society.
Empires have always attempted to disarm those over whom they rule as I described in"The Second Amendment in Global Perspective."
That process, with respect to the Militia, has been going on since the 1790s, was greatly increased by Elihu Root in strucuring the Empire over a century ago, and has proved in Iraq that the National Guard is not an efficient guardian of Empire, hence all of the private Mercenaries there, outnumbering the regular army, etc.
This, also harks back to Rome, and is a whole dimension ignored by Rand in describing the collapse of the nation, at a time in the 1950s whe this was all being developed, with the great fear being the Soviet Union.
Today, as Homeland Security builds its internment camps for dissidents, the great fear is the GWOT, although Obama and the Pentagon are now offering us an alternative terminology.
3) Who does all of the scut work in Galt's little Utopian community?
Well, we see writers working as fishwives and scientists working as janitors, so I think she's answered that question.
Response: I don’t think she answered it at all. That may even be the most far-fetched piece of sheer fiction in the whole book. Few so-called intellectuals that I have ever known would do that!
Many years ago, F.A. Hayek chuckled at a discussion of mine in Egalitarianism and Empire about the sociological significance of the long finger nails of the Chinese Mandarins, still the ultimate definition of the intellectual as career bureaucrat, whether in Business, Government or Academia. And, I might have added, their soft hands, certainly unlike those of the architect/builder, Howard Roark.
Within several months we will be building a model home for Veterans here in Asheville, based on the technology the M-HEF used in building a Community Center in Guatemala last year, using a number of women, of what you might call the heroic, Dagny Taggert type. I believe we can dry-in a 3/2, 1,200 square foot building for $15,000, and complete it for the total price of a mid-sized car.
Tell you what, Rod. I hereby invite you to come on over, perhaps a six-hour drive from Auburn, and let us film you actually participating in this project. That might convince me that I am wrong, at least about some intellectuals and their soft hands.
As we complete this project and document the process on paper and film, a friend of mine will be presenting these to Michelle Obama, who has pledged to help our homecoming Veterans and their families. We also have gardens, a greenhouse for winter, and a number of cisterns, loaded with rain and other waters, for use in the months ahead.
4) How would a movie handle Galt's 125 pp. blather about the virtues of Objectivism?
They would shorten it, just as Rand herself shortened Roark's speech for the film version of The Fountainhead -- and just as lots of books with long philosophical speeches in them (e.g. Dostoyevsky, Swift) get the speeches shortened in the movie versions. You seem to have a chip on your shoulder about this book but I'm not sure why.
Response: Obviously, it would have to be shortened, and no doubt, that would probably improve it.
The nature of the “chip” on my “shoulder,” as you put it, thank goodness it is not the Earth Miss Rand imagined on Atlas’, ought to be evident from these comments. She just misses the mark about the way in which History and the World works.
5) As to railroads, these have since the 1820s been a prime source of Gov't largesse.
As is likewise noted in Atlas Shrugged, where Taggart Transcontinental is said to have been unusual in disdaining government help (until Jim Taggart took it over and made it one more lobby yelping for special favours). And the railroad cartelisation legislation described in Atlas is based on Woodrow Wilson’s actual railroad cartelisation policies.
Response: Lastly, your final sentence, if correct, suggests to me both Rand and you need to have read a bit more in American History. Wilson did not “Cartelize” the railroads during WWI, he “Nationalized” them!
Surely, you undertand the difference!
Critics have argued the Anti-trust laws actually cartelized the railroads in the late 19th century. In 1920, radicals on the Left praised Wilson’s Nationaization and wanted it to continue.
Try Googling “Woodrow Wilson” + “Nationalization” and you’ll find more than you wish to know on the subject.
If the movie is made, perhaps there are enough Objectivists around (most I have known have been simply, rigidly, Objectionable) that it will turn a profit. We’ll see!
In conclusion, using Rand’s novel to analyze the present situation, is what the historian W.A. Williams once referred to as The Great Evasion. Our intellectual time and effort could much better be employed elsewhere!
Amy H. Sturgis
The first installment debuts on PBS on April 13; you can read more about the series here.
Here is the lineup of episodes:
1. After the Mayflower - In 1621, Massasoit, sachem of the Wampanoags of New England negotiated a treaty with Pilgrim settlers. A half-century later, as a brutal war flared between the English and a confederation of Indians, this diplomatic gamble seemed to have been a grave miscalculation. Directed by Chris Eyre.
2. Tecumseh's Vision - In the course of his brief and meteoric career, Tecumseh would become one of the greatest Native American leaders of all time, orchestrating the most ambitious pan-Indian resistance movement ever mounted on the North American continent. After his death he would live on as a potent symbol of Native pride and pan Indian identity. Directed by Ric Burns and Chris Eyre.
3. Trail of Tears - Though the Cherokee embraced" civilization" and won recognition of tribal sovereignty in the U.S. Supreme Court, their resistance to removal from their homeland failed. Thousands were forced on a perilous march to Oklahoma. Directed by Chris Eyre.
4. Geronimo - As the leader of the last Native American fighting force to capitulate to the U.S. government, Geronimo was seen by some as the perpetrator of unspeakable savage cruelties, while to others he was the embodiment of proud resistance. Directed by Dustinn Craig and Sarah Colt.
5. Wounded Knee - In 1973, American Indian Movement activists and residents of the Pine Ridge Reservation occupied the town of Wounded Knee, demanding redress for grievances. As a result of the siege, Indians across the country forged a new path into the future. Directed by Stanley Nelson.
David T. Beito
This is a film clip of Howard from December 1955 in which he decribes his strategy to fight the credit squeeze by the racist Mississippi white Citizens Councils against civil rights activists.
Howard is the subject of my book, Black Maverick: T.R.M. Howard's Fight for Civil Rights and Economic Power. He was a mentor to Medgar Evers, chief surgeon of a fraternal hospital, one of the wealthiest blacks in Mississippi, Republican candidate for Congress, and champion of self-help and mutual aid. Howard also played a key role in finding witnesses and evidence in the Emmett Till murder case.
For audios of Howard's speeches, including his eulogy at Medgar Evers' funeral, see here.
What did the captain and crew of the Maersk Alabama have in common with the victims of the Binghamton murders?
Both were unarmed and defenseless against evil.
In the Binghamton case, this probably had to do with the fact that government offices, such as immigration services centers, tend to be no-gun zones. In the case of the commercial ship, the reasons are more complex.
Jane Jacobs told a story in a brilliant book years ago that is very much to the point here.
During the Middle Ages, she says, the rising merchant class of the island nation of England found that to really prosper they had to cross the seas to conduct trade in other lands. But the seas were swarming with pirates, and they lost ships and treasure. But they found a solution. Pooling their resources, they built a flotilla of armed ships. Then they gave the ships as a gift to the king, with the request that his men go out and clear the seas of pirates.
Why, having the resources and the ships, didn't they themselves go out and kick pirate butt?
There are at least two sorts of reasons. First, trading and fighting force with force are two very different skill sets. The solution to the problem of the Maersk Alabama is not to say to the crew,"Here, have some guns!" They are not trained in their safe and effective use. There are indeed a number of reasons why they don't want to be so trained.
As Jacobs points out, traders and professionals in the use of deadly force follow moral codes that are profoundly different, and they generally do not mix very well. Trade is based on on a respect for human rights -- the main ones involved admittedly are property rights, but they are rights nonetheless. To trade valuable goods with a complete stranger who is armed would mean worrying about whether he might just kill you and take your goods for free. If the Maersk Alabama had been armed, there are ports in the world that would not have allowed it to dock. Its mere presence would constitute a security risk.
What is the alternative to do-it-yourself security? There are plenty of people who are saying that the only long-range solution is to go in and"fix" Somalia. I think these are the same people who"fixed" Iraq, Afganistan, and Vietnam. Remember them? They are much, much more dangerous than the pirates. If they have their way, they will take far more lives and destroy far more treasure. Come to think of it, they already have.
But there is a third way. For a fee, private firms who specialize in protective services, will protect your ship. Depending on the policy you purchase, they may put armed guards on your ship or, if for any number of reasons you don't want to do that, you can take out a fancier and more expensive policy and they will escort you with a convoy of armed boats through pirate infested waters. The latter sort of policy would solve the unable-to-dock problem. You can rendezvous with your guard boats at a pre-arranged point and part with them after passing through the dangerous waters, at which point their check will presumably be in the mail.
Like everything else in life, the third-party security alternative has both positive and negative aspects. But with time it may prove far preferrable to both alternatives: either continuing to count ransom and pirate violence as an expense of doing business, or allowing liberal imperialism to shove us into yet another political black hole in the Middle East.
Either one of the main free market solutions have one big advantage over any government solution: They will be paid for by the people who benefit the most from them. And they will be paid for if, and only if, they are worth the cost.
There is one shipping line that has not been hit by the pirates. It is the ZIM Integrated Shipping Services.
Why is this? Because the Israeli crews are armed, to protect themselves and their ship. The pirates are not interested in taking on a crew, perhaps all of which have served and been trained in the Israeli Defense Force (IDF).
They, apparently, don’t need the navies of the world to protect their ships. If I were shipping by container through one of the pirate infested areas, that is the company I would use.
Other shipping companies might take a lesson from ZIM.
Hat tip to John Moore for mentioning ZIM to me.
*In 1988 William Marina was the founding Dir. of the Florida-Israel Linkage Institute at FAU.
Hummel and Henderson base their argument mainly on the claim that the Fed was not an engine of inflation between 2001 and 2006 because the rate of growth of the monetary base and the rate of growth of various monetary aggregates were declining during that period. Indeed, they were declining. Computing the rates of growth for the December value relative to the preceding December value, I find the rates to be as follows for the monetary base: 2001, 8.7%; 2002, 7.5%; 2003, 5.8%; 2004, 5.0%; 2005, 3.6%, and 2006, 2.9%. The rates of growth of M2, computed on the same basis, were as follows: 2001, 10.3%; 2002, 6.3%; 2003, 5.0%; 2004, 5.7%; 2005, 4.0%; and 2006, 5.4%.
It does not follow, however, that simply because these (and other monetary) rates of growth were declining, the Fed bore no responsibility for fueling the housing bubble. If we begin at a high rate of growth, as indeed we did in 2001, then rates may fall and still be “inflationary” in their effect on certain asset markets. Consider, for example, that during the entire period from the fourth quarter of 2000 to the fourth quarter of 2006, real GDP rose by only 14.9%, whereas during the same period (December-to-December monthly figures being used) the monetary base increased by 38.3% and M2 by 42.7% — or, by 2.6 times and 2.9 times as much as real GDP, respectively.
In pondering the Hummel-Henderson thesis, I keep coming back to various analogies, such as this one: I walk onto the street and I’m hit by a car going 50 mph; the next day, I walk out and I’m hit by a car going 45 mph; and, being a slow learner, I walk out during the next three days and I’m hit in daily succession by cars going 40 mph, 35 mph, and 30 mph. After five days, I am pretty nastily banged up, but Hummel and Henderson come along to comfort me by informing me that my being hit repeatedly cannot actually have hurt me because each day the car that hit me was going slower than the one that hit me the day before.
Hummel and Henderson also continue to endorse Alan Greenspan’s story that the real culprit was a surge in foreign savings that was invested in large part in U.S. housing-related securities, such as Fannie and Freddie’s bonds. I confess that I have never understood this story. In order to invest in U.S. securities of any kind, foreigners need to acquire dollars. And all dollars ultimately come from the Fed, because every dollar consists of either a circulating Federal Reserve note or a dollar deposit account subject to a variety of Fed controls. Was the Fed really powerless to “sterilize” the inflow of foreign savings? Or did it simply not attempt to offset this inflow, which it might have done by, for example, selling securities on the open market or by increasing required bank-reserve ratios?
In raising these questions, I assure my readers that I harbor no ideological or personal animus whatsoever against Jeff Hummel and David Henderson. Indeed, I love each of them as I would love a brother (which, in a sense, each of them is to me). I am puzzled by their persistence in attempting to persuade us with a story seemingly aimed at vindicating the Fed (while insisting, however, that, all things considered, the world would be better off without this central bank). I continue to believe that the Fed deserves a major part of the blame for the housing bubble because, however we tell this whole sorry story, our interpretation must inevitably include a plausible answer to the question: where’d the money (i.e., the dollars) come from?
David T. Beito
David T. Beito
Will the current outrage in Montgomery provoke a modern civil rights movement against eminent domain through the back door? It certainly should.
On Wednesday in Montgomery, developer Jim Peera displayed this map as part of his testimony at a public forum of the State Advisory Committee (which I chair) of the U.S. Commission on Civil Rights. The pins show buildings demolished by the city of Montgomery in 2008. As you can see, the vast majority are concentrated in one area which just so happens to be heavily black and low-income. Ironically, the area included the apartment of Rosa Parks.
Typically, the city will designate a building as"blighted" or a"nuisance," sometimes using a subjective and arbitrary standard, as in the Jimmy McCalll case. It then bills the owner for the demolition costs. Because many of these owners are poor, they will either have to abandon their land or sell it at a high discount to either a private developer or the city. Even when they can afford demolition, taxes, and other costs, the city has repeatedly destroyed the current or best use of the land by changing the zoning designation to single-family housing. The result is the same: abandonment of the land or sale at bargain-basement prices.
Unlike conventional eminent domain, the owner under eminent domain through the back door has no right to compensation from the city, even in theory.