Finding Shelter from Monetary Racketeers

Henry Hazlitt said that to cure inflation, stop inflating, but surprisingly, most economists and politicians don’t want a cure. They believe a little inflation is not only good, but necessary. According to this view the real boogeyman is deflation—“a general decline in prices,” per Ben Bernanke—and government’s monopoly money-manager is dedicated to doing everything possible to keep prices forever rising.

Not everyone cherishes having their money driven into the abyss of worthlessness by the deliberate actions of others, but given its overwhelming fear of deflation, along with the profit for a connected few in counterfeiting, the Fed goes ahead and ruins our money anyway.

Admittedly, when your job is to print paper mandated as legal tender at almost no cost, in such a manner that the general public is made unaware of the pain yet to come, who likely have no idea even what your job is other than making muddled public pronouncements, things can occasionally get out of hand. In the extreme, this can lead to inflationary disasters such as those that occurred in Germany, Hungary, China, Greece, Israel, Zimbabwe (twice), Yugoslavia, Peru, Argentina, Venezuela, and most recently Lebanon. By 2018, for instance, the annual inflation rate in once-prosperous Venezuela hit one million percent. Zimbabwe, having achieved an estimated annual inflation rate of 89.7 sextillion percent in November 2008, cooled down then re-ignited again to 737 percent by July 2020.

Hidden behind these percentages was pain most Americans can’t imagine. A former Lebanese entrepreneur, who lost everything during his country’s monetary meltdown, reflected on his experience:

Watching ordinary people resort to crime and violence just to feed their children and care for sick relatives is the inevitable conclusion of a currency collapse. People are never prepared for it and the desperation leads to severe consequences.

In the US, Fed chairman Paul Volcker, appointed by President Carter in 1979 to put a brake on inflation that would peak at 11.6 percent the following year, took a cold-blooded approach and simply stopped printing money rather than directly raising interest rates. In response to questions during his Senate confirmation hearing, Volcker told them,

. . .the [money] supply had been “rising at a pretty good clip,” and there was no evidence the nation was “suffering grievously from a shortage of money.”

What happens when someone on a bender stops cold turkey? By late 1980, the pain had arrived, as the federal funds rate hit 20 percent and the mortgage rate 18.45 percent but only for people with good credit.

As the Proverb says, “As a dog returns to its vomit, so fools repeat their folly,” and so the printing presses have been rolling since the Volcker episode. According to the Federal Reserve Bank of St. Louis, in response to pandemic shutdowns in 2020, the Fed switched to industrial grade inflation, boosting M1 from $1.5 trillion in January 2020 to $7.3 trillion by January 2022.

Conflicting Monetary Histories

Alan Greenspan, who followed Volcker as Fed chair in 1987, reflected on the Fed’s performance as a guardian of monetary stability over the decades, telling the Economic Club of New York in 2002 that,

. . .in the two decades following the abandonment of the gold standard in 1933, the consumer price index in the United States nearly doubled. And, in the four decades after that, prices quintupled. Monetary policy, unleashed from the constraint of domestic gold convertibility, had allowed a persistent overissuance of money.

More revealing still was what he said before the passage above:

Although the gold standard could hardly be portrayed as having produced a period of price tranquility, it was the case that the price level in 1929 was not much different, on net, from what it had been in 1800. (emphasis mine)

You might want to read that last part over. Consider what the period 1800-1929 included: devastating wars, slavery and its termination, the explosive growth of industrialization, railroads, inventions, and population, especially from immigration, and a decrease in agricultural employment due mostly to technology. Thomas Edison alone received a record 1,093 patents. Tesla-Westinghouse AC electrification projects transformed factories and cities and spurred the invention of household appliances such as washing machines, vacuum cleaners, and refrigerators. Cars, radios, and to some extent, airplanes—the science fictions of their day—became accessible to the middle class. Prosperity during this period, especially during the latter part of the 19th century, skyrocketed.

Even under a government-controlled gold standard, prices in 1929 were only 1.36 times higher than they were on average in 1800. Sounds like more of a period of deflation rather than inflation. And we find that prices in 2024 are 18.44 times as high as average prices in 1929. Greenspan was correct—by unleashing the constraint of “domestic gold convertibility,” Fed inflationists have devastated the value of the dollar and redistributed the wealth of dollar users.

Yet Bernanke—scoring a near-perfect SAT score during his high school days in Dillon, South Carolina, earning a PhD in economics from MIT, awarded Time Magazine’s Person of the Year in 2009, and winning the Nobel Memorial Prize in Economic Sciences in 2022 for his work on the Great Depression—mustered this comment about inflation:

Since World War II, inflation—the apparently inexorable rise in the prices of goods and services—has been the bane of central bankers. Economists of various stripes have argued that inflation is the inevitable result of (pick your favorite) the abandonment of metallic monetary standards, a lack of fiscal discipline, shocks to the price of oil and other commodities, struggles over the distribution of income, excessive money creation, self-confirming inflation expectations, an “inflation bias” in the policies of central banks, and still others. (emphasis mine)

He suggests that the cause of inflation is subjective, a matter of opinion (“pick your favorite”), but whatever it is, it’s “apparently inexorable.” How did the economy somehow avoid a significant rise in prices during the period Greenspan mentioned—1800-1929? Nothing inexorable there, other than long-term price stability. Then again, unlike today, most of that period was constrained by “gold convertibility.”

If a gold miner introduces his product into the economy it thereby increases the money supply (assuming gold is accepted as money) but is it fair to call that inflation? Gold’s limited quantity is one reason it’s been accepted as money. Nor has the miner violated anyone’s property rights by extracting and exchanging it for goods or services. He’s actually engaged in barter when he trades it for something else. That it happens to be universally-accepted in trade and is called money sometimes obscures this fact.

Paper money that rolls off the presses without a commodity behind it has never been accepted without government fiat. It derives its power from the guns behind it in the form of legal tender laws. Central banks like the Fed are the state’s private counterfeiters.

Since the state still prevents us from using gold, many people—including the Lebanese entrepreneur previously mentioned—are finding monetary security in Bitcoin. Though I personally have reservations about money that only exists in cyberspace, without physical manifestation, it nevertheless has properties that make it suitable for a medium of exchange and preferable to fiat money.

Originally Posted at https://mises.org/

zerohedge
Economics , News , Politics , Science
December 7, 2024
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The Miserable Cost Of An Open Border

Authored by Seth Barron via RealClearPolitics,

The Biden-Harris experiment in dissolving the U.S. border has wrought massive changes to American society, most of which will not be understood for years, if not decades. Since 2021, U.S. border officials have had at least 10 million “encounters” with migrants, many of whom were allowed to enter the country. There is no telling how many more aliens entered the country without encountering enforcement agents. The population of the United States may have increased by as much as 15 million people in just a few years.

This massive flow of humanity crosses multiple national borders, involves every mode of transportation, accounts for billions of dollars paid in fees to smugglers, and describes a fantastically complex economy of suffering and hope. In an effort to get a handle on this human tide, noted muckraker James O’Keefe – known for his hidden camera “gotcha” interviews with abortionists, media executives, progressive nonprofit executives, and other degenerate types – traces the migrant onrush from its source, and seeks to trace the machinery of profit and influence that is conducting it from great removes.

“Line In The Sand,” the resulting documentary, is a remarkable and humane exposition, revealing perspectives and images American audiences have mostly been prevented from seeing. O’Keefe and his intrepid team begin on the U.S. side of the Mexican border, where we witness migrants crossing the border through holes that their guides have cut in a fence that serves as a target as much as a barrier. Infrared cameras show dozens of illegal aliens streaming toward “pick-up” vehicles on the U.S. side while smugglers – presumably cartel members – a few feet away taunt O’Keefe and his group. “What if I were to run up to them right now, what would happen?” O’Keefe asks his guide. “I would highly advise you against that,” he is told, in a classic understatement.

The fact that coyotes and other human traffickers are paid to assist northbound migrants with their passage is no scandal; we all know what their motivations are and why they are doing what they do. But O’Keefe documents multiple examples of U.S. Border Patrol agents standing idly by while illegal aliens cross, virtually under their noses. “Why aren’t you doing anything?” he asks. “Have a good day, guys,” a border agent desultorily responds before driving off in the general direction of the episode. Later, a migrant stands in front of a Border Patrol truck, clearly trying to alert the agents of his intention to surrender, but is studiously ignored until O’Keefe and his team call their attention to him.

There is a kind of sad comedy in the operations of U.S. border security, and O’Keefe is not unsympathetic to the absurd position that border agents have been put in. Trained to defend the national border and to serve as the first line of defense of American soil, these agents have been recommissioned as a perverse Welcome Wagon for illegal aliens, charged with making their undocumented and uninvited entrance to the United States as commodious as possible.

Looking to get deeper into the heart of this migratory avalanche, O’Keefe went deep into Mexico, to the city of Irapuato, about 150 miles northwest of Mexico City. Irapuato is a popular railway junction where thousands of migrants climb aboard “La Bestia,” or “The Beast,” a cargo train that chugs northward toward the United States. In the film’s most remarkable footage, O’Keefe and his team join with migrants, mostly from South and Central America, to ride The Beast, also known as “el Tren del Muerto,” or the Train of Death. O’Keefe talks to the migrants without condescension, asking them their destinations and what they plan to do when they get there, and their concerns about the perilous nature of the journey. We see the film crew race to jump on a moving train and clamber on top to sit in a pile of coal; O’Keefe is shocked at how truly dangerous this small element of the trip is and sympathizes with the migrants’ difficult choices. These scenes are among the film’s most affecting, along with the crew’s random encounter with a little girl who had just crossed the border after journeying from Guatemala by herself. There is a human dimension to illegal immigration, and O’Keefe does not ignore it.

However, there is also an impersonal dimension to this massive population transfer, and O’Keefe determinedly aims to uncover it – to put a face to the institutions and administrators that benefit from the rough injection of millions of people into American society. From government agents to bus companies to nonprofit resettlement groups to private contractors running huge, walled compounds housing thousands of children, O’Keefe doggedly tries to penetrate the mechanics of a system that resolutely hides itself behind a screen of silence, usually in the name of “safety” and “privacy.”

Some of the film’s more comical moments pertain to these segments, such as when the team follows some just-arrived Chinese migrants in San Diego to an employment agency, where other Chinese aliens, already in the country for several months, complain that it’s much harder to live in the United States than they had imagined. O’Keefe tries to sniff out a connection between the owner of the agency and more powerful actors, but it emerges that there really isn’t much going on; in fact, the owner asks O’Keefe if he knows of a way to apply for government grants.

Elsewhere, O’Keefe tries to get information about the operations of several huge residential centers for unaccompanied minors and tries to spin their refusal to give him access to the centers or submit to interviews as evidence of the existence of vast, government-funded child sex trafficking networks. But it seems more likely, though no less troubling, that the open borders policy of the last four years has created a tremendous humanitarian crisis of alien children roaming the continent by themselves, and the government is probably trying to keep them from becoming prey to sex traffickers while they sort out where to send them. Though O’Keefe does not uncover a salacious network of child predators, his vigorous pursuit of the truth does reveal the existence of a large, shadowy, government-funded, and lucrative system of child “welfare.”

So, “Line In The Sand” is correct in the larger sense that billions of dollars are being spent managing this human flow, and many people are getting rich off of it. The last thing these parasitical administrators of the nonprofit industrial complex want is for the border to close. O’Keefe does a great job of capturing in real time the corruption of a local New York City nonprofit called La Jornada, whose leader, Pedro Rodriguez, evidently perpetrates fraud, demanding fees for services that the city provides for free. O’Keefe also sends a Spanish-speaking reporter undercover into the Roosevelt Hotel, New York City’s main processing center for newly-arrived migrants, which offers him free housing, medical care, and even airplane tickets, even though the reporter explains that he has no identification of any sort. How, O’Keefe asks, in our post 9/11 security-obsessed era, are we to make sense of a system that admits millions of unvetted foreigners into the country, and then offers to fly them anywhere they care to go?

“Line In The Sand” is rough in parts, but intentionally so. Its subject is so sprawling and tangled that a neat and clean representation would be a lie. Even with a nine-figure budget – which this film assuredly did not have – a documentary about the border and the 30 million-footed human swarm that has crossed it would be messy and incomplete. But James O’Keefe and his small team have done something remarkable. They have taken on the decade’s biggest story, given it form, and preserved the humanity of its subjects. It is worth watching.

Seth Barron is a writer in New York and author of the forthcoming “Weaponized from Humanix.”

Tyler Durden
Sat, 12/07/2024 – 17:30