Lately, Donald Trump and his team have taken to labeling their opponent, Vice President Kamala Harris, as a far-left socialist—even a full-on communist. The strategy comes after an uncharacteristic lull in messaging from the former president and his team as they worked out how to prudently attack the vice president.

It’s the job of a presidential campaign to make people terrified about what’s in store for the country if the other side were to win. But there are several problems with labeling Kamala Harris a communist.”

First, strategically, this approach risks taking steam out of the best parts of the Trump movement. As Dave Smith argued on Part of the Problem last week, much of Trump’s appeal has come from his opposition to the political establishment. By framing Harris as an extremist, Trump is implicitly placing his campaign on the side of the status quo.

But beyond being a bad campaign strategy, the claim that Harris is a radical communist is just not true. And that’s important for her critics to understand because the threat she poses is actually far more dangerous.

Before continuing with what could easily be derailed into a semantics debate, it’s important to define some terms.

Socialism is an economic system where private property has been abolished as it relates to the production of goods and services. All production decisions are determined by the commands of state or cooperative managers in a non-market environment—meaning without prices.

Communism is a more extreme form of socialism where private property, hierarchy, and social class are abolished in all parts of life. While parts of a mixed economy can and do have socialist qualities, communism is a totalitarian system that encompasses everything.

Neither of these terms describe the current political-economic system of the United States. We live under what can better be called interventionism.

Interventionism is a system where a small political class uses government interventions in a market economy to coercively transfer wealth into their own pockets. As Ludwig von Mises detailed in a number of his books and essays, interventionism inevitably moves towards socialism as the predictably bad consequences of interventions are used to justify more interventions, leading to more and more government control over the economy.

But while the politicians, bureaucrats, and politically-connected business leaders who make up the political class often rely on socialist rhetoric and Marxist academics to justify their next interventions, it is not in their interest to jump straight to a full-on socialist economy. There is too much money to be made along the way, and they want their coercively extracted profits to remain private.

Kamala Harris is an interventionist. She is fully committed to the big scam at the center of the political system and economy. That’s what makes her so dangerous.

While communism itself is far worse than the interventionist system we are dealing with today, having a communist in the Oval Office, at the ostensible helm of a government committed to interventionism, would not turn America into a communist country.

As has been made clear by the cognitive decline of Joe Biden while he remains in the White House, the actual position of president is essentially a figurehead. Presidents do have power — which is why elections are still important. But, as we saw in the first Trump term, it is practically impossible for presidents to implement sweeping changes to which the rest of the political class stands in total opposition. The federal bureaucracy has shown that they’re willing and able to quietly quash executive orders they disagree with.

A literal communist in the Oval Office would be fairly limited in what they could accomplish. Today’s political class would never rally behind the policies a communist president would be most inclined to pursue—such as breaking up the biggest companies and handing full control over to the workers. The heads of big banks, weapons companies, and tech giants and their friends in the government would make sure such an order or bill never saw the light of day. An ideologically-committed communist would also have principles that they’d be unwilling to compromise on—further minimizing the damage they could do to the country.

Not only does Kamala Harris not have principles, she is also fully onboard with the interventionist racket the political class is pulling on the rest of us. The executive orders and legislation that she pursues will assuredly accelerate the interventionist downward spiral. But they will also be lucrative for the rest of the political class—meaning they are far more likely to come to fruition than anything a communist would strive for.

By trying to characterize Harris as a radical, far-left communist, Trump and his team are not only implicitly taking the side of the very people their campaign should be directed against, they’re also misleading his supporters on the nature of the problem facing our country. If the political establishment is ever going to be defeated, it must first be understood.

Originally Posted at https://mises.org/

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In Paul Krugman’s latest column, he claims that Kamala Harris hasn’t advocated for price controls, only a ban on price gouging on groceries. Of course, these are the same thing. Krugman’s own principles text defines price controls as “legal restrictions on how high or low a market price may go.” A ban on price gouging is a legal restriction on how high a market price may go. Therefore, even Krugman-the-textbook-author admits that a ban on price gouging is the same as a price ceiling.

In his column, he gives examples of price gouging: “Texas prohibits many businesses from ‘demanding an exorbitant or excessive price’ on things including food and fuel during disasters,” “voters hate it when businesses take advantage of shortages to charge very high prices,” and “some of us still remember the California energy crisis circa 2001, when power producers reduced supply to drive up electricity prices.” Krugman is implying that a crisis constitutes an exception—it’s not a price control if it is implemented in response to a crisis.

But then, if you look at his textbook, he provides these examples of price ceilings:  “price ceilings are typically imposed during crises—wars, harvest failures, natural disasters,” “the U.S. government imposed ceilings on many prices during WWII,” and (this will sound familiar) “Price controls were imposed on California’s wholesale electricity market in 2001, when a shortage created big profits for a few power-generating companies but led to higher electricity bills for consumers.”

Krugman-the-textbook-author says the California energy crisis episode was an example of a price control, but Krugman-the-columnist says it’s not a price control; it’s just a ban on price gouging.

I’d be surprised if it wasn’t Krugman, but this kind of doublespeak is par for the course for him.

In his textbook, Krugman lists all the well-known problems with price ceilings. He says price ceilings result in “inefficiently low quantity,” deadweight loss, the creation of winners and losers, “inefficient allocation to consumers,” “wasted resources,” “inefficiently low quality,” and the emergence of black markets. He says that governments may impose price ceilings because they don’t understand basic microeconomics.

But now, Krugman-the-columnist has changed his tune. In his column, he writes, “you can consider it reasonable to have legal restrictions on price gouging.”

Originally Posted at https://mises.org/

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In A Cure Worse Than The Disease: Fighting Discrimination Through Government Control, M. Lester O’Shea criticizes the notion that we should legislate against unfairness. He poses the question as follows: “No one defends unfairness. So shouldn’t it be against the law?” In posing the question that way, his point is that the mere fact that we regard something as unfair – or even morally wrong – does not mean we ought to legislate against it. This point is of central importance to his argument against antidiscrimination legislation.

Walter Williams adopts a similar approach in Race and Economics, arguing that the mere fact that free markets are blind to all sorts of interactions and bargains that we might regard as “unfair” does not mean there ought to be some sort of legislative intervention to redress the unfairness. Williams gives the example of minimum wage legislation, arguing that it is folly to introduce laws mandating a wage determined by the government to be “fair,” while overlooking the fact that mandatory wage interventions often lead to worse outcomes including rising unemployment. Williams therefore regards legislative interventions which attempt to “correct” the market by introducing fairness as misguided. He argues that,

Economic theory as such cannot answer questions of fairness. However economic theory can predict the effects of not permitting some people to charge lower prices for what they sell and [offer] higher prices for what they buy.

In the context of racial fairness, Williams points out that focusing on oppression and discrimination, highlighting the racial injustices of the past and attempting to correct them, does not yield solutions to today’s problems: “an acknowledgement of and consensus on those injustices, and on residual discrimination, do not carry us very far in evaluating what is or is not in the best interest of blacks nowadays.”

A further difficulty with legislating for fairness is that many people who attempt to enforce fairness understand fairness as equality – they argue that fairness requires that everyone be treated equally. This is a reasonable argument if equal treatment means treating everyone the same in relation to legal rights and duties. However, once it is proposed to legislate for equality, an entire raft of equal treatment provisions inevitably follows, which has more to do with allocating phony civil rights to favored groups that are viewed as disadvantaged while punishing other groups that are viewed as advantaged. The fairness enterprise then turns out to be yet another social engineering program.

The declaration that all men are created equal does not require legislative enforcement through the superimposition of a further set of “equality rights.” Further, there is no such thing as a right not to be discriminated against, as a right to non-discrimination inevitably infringes upon the freedoms of others. As Rothbard explains,

…anti-discrimination laws or edicts of any sort are evil because they run roughshod over the only fundamental natural right: the right of everyone over his own property. Every property owner should have the absolute right to sell, hire, or lease his money or other property to anyone whom he chooses, which means he has the absolute right to “discriminate” all he damn pleases.

All anyone can claim is the right to the same protections of life, liberty, and property that vest the same way in everyone. The tendency of equality legislation to transmute from formal equality to substantive equality is not an accident or an oversight, but rather inherent in the nature of enforcing fairness.

At an abstract level, it is easy to distinguish between equality and equity, but any attempt to legislate equal or fair treatment relies on a concept of “discrimination,” which in turn requires measurement of outcomes. That is because no advocate of equality enforcement has so far been able to suggest an enforcement mechanism which does not rely on comparison – we know whether two things are equal by comparing them – and comparison, by its very nature, requires measurement. Measurement, in turn, leads to a focus on gaps and inequalities. And, for that reason, legislative enforcement of equality focuses on eradicating gaps or disparities. In practice, eradicating gaps is no different from equalizing outcomes. This is especially true because egalitarians have little or no interest in what causes disparities: they assume a starting point in which everyone is (or should be) equal and set about equalizing conditions without any inquiry into causal factors.

In the view of many egalitarians, fairness is only achieved when everyone enjoys equal material circumstances. Rawls’s difference principle is said to be the relevant approach in determining what is “fair,” namely the principle that fairness is achieved by introducing measures which are “to the advantage of the least well-off class in society,” even if this means sacrificing private property rights. As David Gordon has argued in “Is Rawls Stupid?” far from defending a robust concept of private property, Rawls states that, “Two wider conceptions of the right of property as a basic liberty are to be avoided. One conception extends this right to include certain rights of acquisition and bequest, as well as the right to own means of production and natural resources.” In that sense, Rawls recognizes that his conceptualization of fairness as equality is incompatible with a strong defense of property rights.

Legislating for fairness, in reality, operates to the detriment of private property rights. The folly of legislating for fairness is that ultimately such legislation is incompatible with the liberties associated with private property such as freedom of expression, freedom of association, and freedom of contract.

Originally Posted at https://mises.org/

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Knowing the enemy

Only a very brief formulation of the group egalitarian doctrine and its ideological implications can be done in this article. The idea that every individual human is equal in all abilities and traits is too self-evidently ridiculous to earnestly believe, so what the group egalitarians do is simply push the issue back one layer—believing instead that each group of humans is actually equal. These two beliefs are in reality identical; one necessitates the other. If individual human beings are unequal, then the groups consisting of those human beings are also unequal—and vice versa. Group egalitarianism isn’t any less ridiculous or self-evidently wrong than individual egalitarianism, but the slight process of abstraction necessary to form the concepts of different groups is seemingly all that is necessary to cloud and obfuscate this fact in the mind of the modern progressive.

Now comes the central issue: if all groups are equal, how come there are wide varieties in outcomes in every conceivable area of social activity between every conceivable group of human beings? For progressives, the explanation lies in their theories of social power dynamics. These theories divide societies into oppressors and the oppressed. The determining factor for which category any given group falls into is its degree of societal dominance and influence. Groups that are identified as broadly holding said dominance and influence in a society are designated as the Oppressor Group, while the rest constitute the ranks of the oppressed (or the “marginalized”).

What does this oppression consist of and what are its origins according to the progressives? Simply put, it consists of allegedly repressive and domineering social norms and attitudes, along with outright legal discrimination and state sanctioned violence. The origin of these horrible atrocities?—the Designated Oppressor Groups created them, of course. It’s all their work. After all, they’re the only ones who are able to create and perpetuate norms, customs and laws anyways; everyone else is far too powerless and marginalized for such a task.

The “repressive cultural and social norms and attitudes” progressives decry are not just the outright open racism, sexism, xenophobia, homophobia etc. which one can easily point to and identify. For them, it’s much more complicated. What they’re battling against is any social norm and attitude which differentiates a group A from a group B when informing one’s value judgments. Since progressives view all groups as intrinsically interchangeable, and only made different via environmental factors; for them it follows that any and all norms and dispositions which rely on viewing them as different are inherently arbitrary—and very frequently harmful, oppressive, and prejudiced towards the marginalized groups.

These norms are so woven into everyday society that those who perpetuate them don’t even know of their “implicit bias” and prejudice against marginalized groups (if members of marginalized groups perpetuate them themselves, they’re said to have “internalized prejudice” against their own group). The allegedly gargantuan negative effects that the norms and legal precedents of the dominant society have on the marginalized (from “microaggressions” to “systemic discrimination”) are what stands in the way of them being on par with the success of the Oppressor Groups. The task of the progressive is to uncover and bring attention to these attitudes, behaviors, mechanisms and institutions. Most of them seem innocuous and trivial to your average person, but not to the progressive. They have the social awareness necessary to allow them to identify these “oppressive forces” and the harm which they claim springs from them (this is what being “woke” refers to—an awareness of what progressives deem as “social injustice”).

What if a member of an Oppressor Group points to a norm or law which he claims negatively affects him as a member of that group? Progressives deny any possibility of such an instance. According to them, the Oppressor Groups created the very thing he’s complaining about in the first place; so to assert that it could possibly affect them negatively is nonsense (one of the seemingly infinite non-sequiturs contained within any group egalitarian worldview). In fact, the very act of making such a complaint is met by mockery and derision by the progressives via the laughably ironic accusation of “wanting to be oppressed really badly.”

Any of these “repressive norms and laws,” then, can only negatively affect the marginalized according to the progressive—and they’ll use all the clever rhetorical tricks at their disposal to argue for this claim. So, for example, if a man is being mocked or criticized for acting feminine, that’s an example of a “misogynistic implication that acting feminine is bad.” Conversely, if a woman is being mocked or criticized for acting masculine, that’s an example of “misogynists telling a woman how she can and can’t act.” Almost anything can be interpreted as racist, sexist, ableist, classist, heteronormative etc. if you make the case sound convincing enough to at least someone; this is how you end up with classics such as “The Unbearable Whiteness of Hiking.”

What of blatant resentment or prejudice by members of the marginalized toward one or more of the Oppressor Groups (which would be a predictable result of hammering into them the idea that such groups are inherently culturally biased and prejudiced against them and are to blame for their shortcomings)? The more radical progressives will tell you this doesn’t constitute racism or sexism or classism or what have you because the marginalized do not have the “systemic power” to engage in those behaviors, while the softer progressives will agree to describe it in those terms but say that it ultimately doesn’t matter much because hatred of the oppressors by the marginalized isn’t “socially impactful.” To sum up, behaviors and attitudes from the Oppressor Groups which are seen as completely innocuous by the bulk of society constitute horrible repressive “implicit biases and prejudices” that need to be identified, psychologized and eliminated for the cause of social justice; but open hatred by the marginalized can safely be handwaved as irrelevant.

The theory of “intersectionality” ties this whole project together, claiming that the intersection and overlap between one’s (either marginalized or oppressive) social identities determine where one is on the Oppression Olympics totem pole. The more marginalized identities you have, the more qualified you are to speak on the topic of “social justice” due to your “lived experience” (what in the world is a non-lived experience?) of enduring discrimination. What can you do if you’re a member of one or more Oppressor Group and are a supporter (in their terms, an “ally”) of social justice? “Decenter” yourself and let the marginalized take the lead while you spread the message in the background. Can one overcome their marginalized status through their own effort? No, that’s “pull yourself up by the bootstraps” nonsense; the issue is systemic in nature.

Anti-meritocracy envy

The complete intellectual bankruptcy of this whole doctrine should be clear. To view differences in outcomes between groups as inherent evidence of domination and oppression of the less successful group by the more successful is an error; those differences can and do happen naturally and organically (this is not to deny the historical and present existence of oppression and domination). To view different social norms and stereotypes associated with different groups as inherently arbitrary, harmful and created by the more successful to subjugate the rest is an error (this is not to say that all social norms and stereotypes are automatically useful and accurate).

Despite their pretenses about “compassion for the marginalized,” what these false starting points followed with ridiculous non-sequiturs, psychologizing and wishful thinking betray in their believer is a deep sense of envy. At the fundamental level, these doctrines identify success with oppression; an anti-meritocratic doctrine through and through. It’s difficult to describe the evil contained within a worldview which blames the successful for the shortcomings of the less successful. Ayn Rand identified the phenomenon as “hatred of the good for being the good”—hatred caused not by someone’s vices, but hatred of a person for possessing a value or virtue one regards as desirable.

Envy is a potentially very dangerous emotion; it played a large part in the genocide of the Tutsi (which dominated Rwandan society despite being only 14% of the population) by the Hutu. Don’t be fooled by the prestige of the academics propagating the group egalitarian doctrine—it is the primitive superstition of our age.

Originally Posted at https://mises.org/

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In June, the Texas Supreme Court rejected a lawsuit claiming that the Public Utility Commission of Texas (PUCT) had broken the law when it set the wholesale price of electricity at $9,000 per megawatt hour for about 80 hours during the Texas blackouts that occurred during Winter Storm Uri in February 2021.

The PUCT’s commissioners had dictated the price of electricity because they believed that market-driven “energy prices across the system…as low as approximately $1,200” did not “accurately reflect the scarcity conditions in the market.” Their decision drove the total cost of electricity for those three days to as high as $38 billion, more than Texans had paid for electricity over the previous 12 months.

The Supreme Court never sought to understand why the Texas Legislature in 1999 determined, “that the public interest in competitive electric markets requires that…electric services and their prices should be determined by customer choices and the normal forces of competition.” Instead, the justices simply posited that, “The Commission has the expertise to manage the electric utility industry; the courts do not.” They did not question whether the PUCT actually could or should manage the almost $50 billion a year Texas electricity market. Their focus was to “ensure that the courts will stay in their lane” by not interfering with regulators.

In his Foundations of the Market-Price System, Milton Shapiro wrote, “[T]hroughout history only two principles have guided the formation of prices in the market place: the free-market principle and the interventionist principle of the ‘political means.’” The political has become the favored means of determining prices in America, even in “conservative” states like Texas.

In the aftermath of the Uri blackouts, Texas Lt. Gov. Dan Patrick backed the political means when he proposed a government “managed capacity market where additional plants are built to provide emergency backup power.” His rationale for the political takeover of the Texas electricity market was that “prices … used as an incentive for investors to build plants … served Texas well for many years, but [that model] failed during the winter storm.” Since then, Gov. Greg Abbott, the Texas Legislature, the Texas electric industry, and many Texas voters have also hopped on the interventionist bandwagon.

In 2022, the PUCT created the ERCOT Contingency Reserve Service (ECRS), which artificially increased the price of electricity by $12 billion in 2023. Then last year the Texas Legislature created, and Texas voters approved, the Texas Energy Fund using $5 billion of taxpayer money. Since then, Abbott and Patrick announced on July 1 they “will seek to expand the program to $10 billion to build more new plants as soon as possible.”

Texas politicians have decided that the political means of determining electricity prices benefit them more than the free market would. They have also convinced many Texas voters that this switch benefits them as well.

The Economic Superiority of Market Prices

Even though most Texas politicians (including Supreme Court justices) are happy with the state’s takeover of the electric grid, the people who elected them should not be. Market prices are superior to government prices when it comes to serving consumers’ interests.

Why is this the case?

Shapiro points us to the answer: “The primary purpose of production is consumption. Man engages in production primarily or ultimately only for the purpose of producing the consumers’ goods he wants, including the capital goods with which to produce the consumers’ goods.” There is no one better to determine the price of capital and consumer goods than those who are producing and consuming them in order to satisfy their needs. It is not going to turn out well when politicians and regulators intervene to set or manipulate prices. This is a commonsense conclusion, but Gary North explains that there are also economic reasons for this:

“Prices are crucial for setting priorities. Without prices, we fly blind. We do not know what things cost. We do not know what people have recently bid in order to buy or rent scarce resources. In a world governed by scarcity, prices are tools of understanding and therefore tools of action. Prices are the most important sources of information that lead to the coordination of competing economic plans of action.”

The information conveyed by prices is most beneficial to market participants when it is fully transmitted to the right people. Friedrich Hayek further describes why this is important:

If we can agree that the economic problem of society is mainly one of rapid adaptation to changes in the particular circumstances of time and place, it would seem to follow that the ultimate decisions must be left to the people who are familiar with these circumstances, who know directly of the relevant changes and of the resources immediately available to meet them. We cannot expect that this problem will be solved by first communicating all this knowledge to a central board which, after integrating all knowledge, issues its orders. … It is in this connection that what I have called the ‘economic calculus’ proper helps us, at least by analogy, to see how this problem can be solved, and in fact is being solved, by the price system.

While a central board cannot solve the economic problem, coordination is still needed. This is the role of entrepreneurs, one that is overlooked or disdained by central planners. According to Frank Shostak, entrepreneurs use price information to bring efficiency—and profit—to the market: “For an entrepreneur to make profits, he must correctly anticipate consumer preferences, the future prices of products and the future prices of the factors of production. Entrepreneurs who excel in their forecasting of future prices make profits, and those that misjudge future prices will suffer losses.”

As regulators manipulate prices, the resulting diminishment of the information contained in prices reduces the efficiency of the market. Entrepreneurs will be much more likely to misjudge future prices if they lose some of the information transmitted through market prices. And consumers, in this case Texans that use and pay for electricity, will be worse off.

Ultimately, price regulation makes us worse off because it interferes with our efforts to economize. Market participants economize because it is how we produce a steady stream of income out of scarce means. Jeffrey Herbener explains this: “For any given end we choose to pursue we always choose the combination of means that we assess as having less value for a given end that we attain as opposed to other combinations of means that have higher value or higher costs.” Societal income and profit are diminished as regulators interfere with the economizing of market participants.

The Ethical Superiority of Markets

The higher cost of electricity relative to its benefits when the government is regulating prices demonstrates that market participants and society overall are better off when prices are set through the market. Austrians don’t need proof to know this is true, yet confirmation of this abounds in the Texas electricity market.

Texas once had the most competitive electricity market in the world. That changed in 2019 when PUCT commissioners gave in to a years-long campaign by thermal generators to artificially increase prices. At the time, prices were artificially depressed because of renewable energy subsidies. But rather than take steps to protect market pricing by directly addressing renewable subsidies, the PUCT—with the Texas Legislature’s support—increased subsidies for thermal generators by artificially increasing prices by 4.3 billion. Texas consumers have been paying more for electricity ever since.

In the five years prior to 2019, federal, state, and local governments increased the cost of electricity in Texas by an average of $3 billion annually. Since then, the average increased cost has been $14 billion. These higher costs take the form of tax credits, subsidized transmission, and manipulation of market prices.

Electricity prices confirm the cost of these measures to Texas businesses and consumers. Wholesale electricity prices averaged $31.18 per megawatt hour from 2014-18. Since then, prices have averaged $76.14. Retail prices show the same trend, though increases lag in the wholesale market. The average price for residential customers was 11.3 cents per kilowatt hour from 2014-18. For the last five years, prices have averaged 12.72 cents. The latest data show March prices at 14.92 cents. At least Texas politicians have not yet imposed California electricity prices (32.47 cents) on their constituents.

Conclusion

Texas politicians have taken over the electricity market because they believe their interests are better served this way. Perhaps this is because they think being labeled anti-green by renewable energy advocates harms their reelection chances more than high electricity prices. Or perhaps they really believe they can solve Texas’ reliability problems better than market participants can. Whatever their reasons, the unwillingness of Texas politicians to “stay in their lane” by serving their constituents is pushing Texans toward California-style energy poverty.

Originally Posted at https://mises.org/

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The recent market weakness suggests a combination of profit-taking and concerns about the latest United States jobs and manufacturing figures, added to the abrupt unwinding of part of the yen carry trade. Valuations had soared and market participants now demand central bank easing. However, rate cuts may not be enough to send markets to new all-time highs. Money supply growth and quantitative easing are needed to maintain these valuations.

Investors are turning to utilities and real estate stocks, but these sectors need more than low rates; they need a buoyant economy and strong consumer demand, so interest rate decisions may be insufficient.

If we look at the long-term trend, the market remains in a cyclical bullish mode, but we need to understand why and be aware of the rise in volatility.

Markets have been rising, discounting an ever-increasing money supply and future currency debasement. However, the next wave of central bank easing may not come until 2025.

Fundamentals may have been weak and earnings not as robust as required by demanding valuations, but investors understand that the fiscal challenges posed by rising government expenditure and public debt will ultimately mean ultra-loose monetary policies, which make sovereign bonds more expensive, erode currency purchasing power and, by comparison, make equities and risky assets more attractive.

Investors may continue to accept higher valuations for equities and risky assets because they fear monetary and fiscal insanity more than they are concerned about a recession.

It is not that markets like fiscal imprudence. Extreme monetary policies erode the currency’s purchasing power, and equities and risky assets become protection for real inflation. Murray Rothbard calculated the true money supply (TMS), which is the most realistic indicator of inflation. As Professor Joseph Salerno explains, “three items which are not included in any Fed measure of the money supply (Ml, M2, M3) or even of overall “liquidity” (L) find a place in the TMS.” These are the demand and other deposits held by the U.S. government, foreign official institutions, and foreign commercial banks at “U.S. commercial and Fed banks.”.

When we look at True Money Supply, we can understand what market participants really look at for a bullish market trend, even if they may not be calculating it in the Rothbard way. The available money for market transactions. The quantity of money that is put to work to generate a return that offsets inflation. “Liquidity,” as most market participants call it.

Mike Shedlock, a great macroeconomic analyst and investor, discusses these important differences when analyzing money growth because they basically give us an idea of the buying or selling pressure in a market. The True Money Supply (TMS) includes the currency component of M1, total checkable and savings deposits, as well as U.S. government deposits, note balances, and demand deposits from foreign banks and public institutions. Any market trader understands this when they are talking of “cash on the sides,” “high liquidity,” and “bullish sentiment.”. All these money measures, when rising, indicate stronger demand for risky assets looking for a return. Alternatively, Professor Frank Shostak’s definition of total money supply includes cash plus demand deposits with commercial banks and institutions plus government deposits with banks and the central bank.

Why are these measures more important than the traditional M2 and M3 money aggregates? Because they show us the level of buying pressure in the market.

Many Keynesian economists see deposits and savings accounts as idle money and invented the ludicrous “excessive savings” concept. There is no such thing as excessive savings or idle money. The reason they see those savings as negative is because their political view of economics perceives that any money not spent by the government is not productive. Far from it. Those savings and deposits are invested in the capital markets and are the key to originating lending, investment, and growth in the real economy. Keynesians tend to think of the “social use of money,” which means more printing of currency through deficit spending, because they mostly perceive that the government is the only one making a real social use of currency issued. However, inflationism is not a social policy but a tool for serfdom that creates hostage clients of citizens by destroying the purchasing power of their wages and deposit savings. It is a transfer of wealth from the middle class to the government.

Once we understand that what matters for market participants is the elusive “liquidity” and “sentiment” perception and that bullish sentiment and liquidity come from a rising true money supply, while bearish signals arise from a decline in this measure of liquidity, then we can understand that the allegedly hawkish messages of central banks disguise a much looser policy than headlines suggest. Furthermore, using any of the different measures of true money supply previously mentioned, we can understand why market participants try to defend their clients from the current and future loss of purchasing power of the currency by taking more risk and accepting higher valuations for growth assets.

Most market participants are aware that higher liquidity injections will mask the current fiscal imbalances. Unsustainable deficit spending is money printing, which creates strong long-term pressure on the purchasing power of fiat currencies. Thus, market corrections are always an opportunity to buy stocks and risky assets that will always rise in value in fiat currency terms because the unit of measure, money, loses purchasing power.

Once it is established that fiscal insanity will make currencies fall in value and, consequently, markets denominated in that currency rise, investors need to understand the timing and where to invest.

The difficulty this time is that now we have persistent inflation and central bank losses in their bond portfolio. Thus, timing is essential. The lag effect of a market correction and its subsequent bounce may be longer. It will happen, but we need to guess when.

After the Fed decided to hold rates steady at its two-day meeting, equities slumped, even though Powell seemed to signal that rate cuts could be coming as soon as September. Markets discounted a slump in liquidity, therefore lowering buying pressure. Hence, multiple compressions. Rate cuts do not signal a healthy economy but a slowing one, so equities slump despite the promise of a rate cut because investors continue to see lower buying pressure.

Even with the bounce after Black Monday, most indices remain significantly below the level when markets started to weaken on July 22. The lag effect of the true money supply started to show its effect on March 13. The Nasdaq and the S&P 500 were leading markets that had begun to slow down and pointed to lower highs and deeper lows.

What can we learn ahead of the next bullish wave of money growth? First, pay attention to the components mentioned above and their trends. Second, analyze when the Fed may start a true easing path, being realistic. The trend now signals liquidity drying up. There may not be a recession, but monetary buying pressure is slowing down markedly. The tap is not closed, but the flow is slow.

The Fed may cut rates in September, but that is only realizing that the economy is weaker than headlines suggest. A rate cut of 25 or 50 basis points is unlikely to generate an immediate burst in credit demand or rising deposits. Hence, the truly bullish signal would come when the Fed returns to purchasing mortgage-backed securities and treasuries. However, that may not happen until elections have passed and there is clarity about the next chairman of the Fed. We may be talking about March 2025.

The next wave of monetary excess will be more aggressive than the past one, that is guaranteed.

Originally Posted at https://mises.org/

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In Race & Economics, Walter Williams emphasizes the importance of causality in understanding racial inequality. He argues that it is not enough to document and track economic inequality — it is necessary also to understand its causes.

Without understanding the causes of any perceived problem, any attempts to resolve it are no more than wild stabs in the dark. For example, Kamala Harris recently argued that black people are less likely to be homeowners, a phenomenon that in her view is caused by the fact that “ninety-seven percent of appraisers are white,” which in turn leads to “inequity in the home appraisal system.”

Having thus identified a problem and decided that the cause of the problem is “racial bias,” the solution in her view is “making information about home valuations and the race and ethnicity of homeowners available to the broader public.” In her view, if people know the race of homeowners, that will “root out racial bias,” which in turn will lead to more black people being homeowners. This approach to social problems is surprisingly popular and is partly explained by the fact that the causes of social problems are considered irrelevant by egalitarians.

The equality industry, which is devoted to eradicating inequality, does not concern itself with the causes of inequality. Egalitarians stipulate that inequality is a problem, assert that this problem is self-evidently caused by injustices such as historical oppression or racial discrimination, and declare that the appropriate remedy is wealth redistribution. When wealth redistribution inevitably fails to make everyone equally wealthy, they take that as evidence that more redistribution is required. This is characteristic of an ideology that revolts against reality: Because the causes of stated problems are irrelevant, the selected remedy is random — anything that strikes the egalitarian fancy — and it follows that the failure of any selected remedy proves nothing.

Some of this disdain for investigating the causes of inequality may be due to ignorance or hubris, but a large part of the disregard for ascertaining the causal factors behind wealth and income distribution is due to the ideology of egalitarianism — egalitarians are not looking for causes of inequality as they regard the link between means and ends as irrelevant. The premise of egalitarian reasoning is that all people are equal, and economic outcomes would therefore also be expected to be equal in the absence of discrimination or oppression. Their theory is that if racial bias is eradicated, all races will default to their “original state” of being equally wealthy. The same reasoning applies to explaining wealth inequality between different countries, as egalitarians attribute global inequality to imperialist exploitation. As the great development economist Peter Bauer observes:

The idea of Western responsibility for Third World poverty has also been promoted by the belief in a universal basic equality of people’s economic capacities and motivations. This belief is closely related to egalitarian ideology and policy which have experienced a great upsurge in recent decades. If people’s attributes and motivations are the same everywhere and yet some societies are richer than others, this suggests that the former have exploited the rest.

Ludwig von Mises has a different premise. He argues that if we acknowledge the reality that people are not equal in the first place, we would have no reason to expect their wealth or income to be equal. In his view, people are not equal, and the concern should therefore be with peaceful cooperation and productivity that improves the material conditions of society, not with equalizing the material circumstances of the unequal: “In any social system the main issue is how to promote peaceful cooperation among people markedly different from one another not only in bodily characteristics but also in mental capacity, willpower and moral strength.”

Mises emphasized that causality is essential to the scientific method. He argued that science “aims at tracing back every phenomenon to its cause” and that ascertaining the causes of phenomena is therefore central to all human action. As Mises explains, “In order to act, man must know the causal relationship between events, processes or states of affairs.” Scientists do not simply make wild guesses on the causes of phenomena — home ownership patterns are caused by racial bias in the home appraisal software! — but instead seek to understand accurately their causes and effects.

It is common sense that the causes of things matter. That is the only rational foundation on which anyone can ascertain the appropriate means to achieve the desired outcome. Mises explains:

Man is in a position to act because he has the ability to discover causal relations which determine change and becoming in the universe. Acting requires and presupposes the category of causality. Only a man who sees the world in the light of causality is fitted to act… In a world without causality and regularity of phenomena there would be no field for human reasoning and human action.

Egalitarians, unconcerned with causality, persist in equalizing wealth through legal interventions. They err in their pursuit of economic progress because, as Mises explains, “the means chosen are not appropriate to attain the ends sought.” Socialism is not an appropriate means of attaining economic productivity. Not only will it fail to produce material progress, as the predictable outcome of wealth redistribution schemes is that everyone will be less wealthy, but it will also disrupt peaceful cooperation and racial harmony.

Originally Posted at https://mises.org/

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Last month, Britain made a dangerous swing to the left. Private education has been attacked, more public housing, the promotion of environmental Marxism, and much more. But that isn’t to say there wasn’t an unspoken gospel among the main parties concerning the deliberate impoverishment of the British Isles. Merely aesthetic differences separate them.

A distinguished associate of mine told me about his grievances, the attacks against people earning lower wages and the political weaponization used by both major parties to score points from the electorate. He also mentioned the infuriating behavior of leftist Samaritans preaching love, but when people vote contrary to their intentions, spew irascible diatribes.

Disappointing as it is, I am not terribly surprised. It would be a mistake to label the conservatives as oriented by free-market liberalism. Some permitted the organization of market forces; others such as Robert Peel, Margaret Thatcher and John Major were proponents of individual liberty.

The notion of one-nation conservatism, also known as Tory democracy, was conceived by Benjamin Disraeli, espousing the belief of a united nation protecting working classes against alleged abuses of capitalism. As prime minister in the 1870s, his government passed the Employers and Workmen Act and the Conspiracy and Protection of Property Act, the latter decriminalizing trade unionism. Social reforms were introduced to smooth relations between Capital and Labor.

Despite these inroads into statism, Britain retained a mostly free-market economy, but the seeds were planted for a seditious social revolution to sprout. As one has read, there are overlaps with socialism. Therefore, it comes as no shock that the first socialist party (Social Democratic Foundation) in Great Britain was founded by Henry Hyndman, a former conservative. His political career foreclosed with his death as leader of the National Socialist Party in 1921.

The calamities of World War I quickly brought Labor into the political spotlight, inspired by the guild socialism of Sidney and Beatrice Webb. Britain abandoned the gold standard in 1931, and in 1945, Labor imposed price control, expropriated businesses and instituted the welfare state, all acquiesced by Winston Churchill, an irreligious “liberal” who maintained the policies of his predecessor — except for the privatization of steel — and praising the powerful trade unions in the name of Tory Democracy at the Conservative Party Conference in 1953; the same inebriate collaborator of Soviet expansionism.

The following decades would be even worse. The Winter of Discontent and severe inflation followed; unprofitable industries were subsidized, leading to wasteful resources. Entire sectors and industries were crippled by trade disruption. Trash wasn’t taken out and the deceased weren’t buried. Food wasn’t being transported, and hospitals and schools shut down. No doubt the Trades Union Congress — a privileged caste disregarding economic welfare — were following orders from the Kremlin.

The premierships of Thatcher and Major represented a paradigm shift concerning the (reduced) role of the state. Yet despite the successes achieved in 18 years away, it wasn’t enough to keep voters away from New Labor, swayed by the charisma of Tony Blair.

It’s true that his government never pursued Keynesian measures, and the memory of the Soviet Union, omnipotent government control, gulags and poverty was still fresh in the minds of many people. Socialism was deeply unpopular. But Blair set out socialization through the destruction of British cultural values and traditions beset by mass immigration and political correctness now threatening to shake the foundations of people’s livelihoods.

No wonder the left collaborates with Islamists — they prohibit the use of usury, a central pillar of consumer time preferences, signaling a preference of present or future consumption. Low time preferences translate into earning and accumulating capital, which is denounced by adherents of Islam, who merely consume their resources, hence their lower living standards and baseless theology devaluing civilizational advances and standards.

Love requires care and cultivates patience; hatred is opaque, facilitating destruction. In 2024, hedonistic behavior is encouraged and boundaries are disrespected. It is why those of a lower cultural and religious order refuse to integrate themselves in countries settling them. Bolshevism was born at the Second Congress of the Russian Social Democratic Labor Party in London. And it was under a Labor administration that diplomatic relations were established with the Soviet Union.

The modern man, stripped of his past, can be molded to be anything: at worst a bee worker for Downing Street.

However, it is worth remembering the nearly forgotten 1997 Conservative Manifesto, displaying an outlook consistent with Paleolibertarianism. Let’s transcribe some of it:

“Our aim is nothing less than tariff free trade across the globe by the year 2020.”

“The family is the most important institution in our lives. It offers stability and security in a fast-changing world. But the family is undermined if government takes decisions which families ought to take for themselves. Self-reliance underpins freedom and choice.”

“People are not just saving for themselves but for their children and grandchildren. These savings should not be penalized by the tax system.”

In a short monograph accompanying the manifesto titled “Why I vote Conservative,” we can find the following quote on page 13: “The best way to improve the performance of British industries is to expose it to as much competition as possible.”

The conservatives would do well to learn from the past, pages of liberty lost to time. But the massive 1997 defeat conditioned subsequent conservative leaderships advocating policies contrary to freedom: LGBT rights and legalization of same-sex marriage, covid lockdowns, quantitative easing and the highest tax burden on record since the Second World War. Inflation is at an all-time high, and as many are aware, perpetual buzzing of the printing machine erodes savings and destroys all productive jobs in the economy, transferring purchasing power from the worker to the state (a stealth tax).

Some within Europe dream of Britain’s return to the European Union and USSR in tandem with the 2030 agenda. Even continental liberals — who misunderstand liberty — championed Labor’s massive victory. And it’s not a one-sided relationship.

Starmer recently announced his intentions of increasing trading ties with the E.U. through a damaging veterinary deal forcing the U.K. into adopting regulations on food and agriculture in accordance with the European Court of Justice, alongside better access for E.U. fishermen within British waters.

It’s ironic that the reinforcement of leftism in Britain came on the Fourth of July, as Americans extricated themselves from the tyranny of King George. Today it’s a new tyranny overwhelming the British population.

Nationalism is truly alive. The new Labor government plans a national renewal by creating Great British Energy, Great British Railway, and the National Healthcare Service — all acrimonious attacks against the British taxpayer and his freedom of choice.

Nationalized industries, not subject to competition, have little incentive for improvement while providing inferior services. The nation does not benefit from these exuberant indulgences of Whitehall. British Airways proudly flies the Union Jack without recourse to public ownership.

A monarchical system of government provides protection of property rights unknown in republican states, where the hands of power are constantly shifting. A monarch will protect his subjects for generations (a low time preference by maintaining a reputable value of the kingdom). This republican stride within the Labor Party is more prevalent given their ambition of abolishing the monarchy. All this nationalism, after all, goes contrary to King Charles’ genealogical roots: German, Scottish, Greek and Danish (House of Glücksburg). Keir Starmer is just English and plainly boring.

British National Socialism is unfortunately here to stay. Opposition is being extirpated, politically and through social media and traditional media outlets. But the people of these great isles are strong and pragmatic.

The history of Britain is replete with manumissions of her subjects throughout the centuries. The Magna Carta and Glorious Revolution curtailing political absolutism set the precedence for the separation of power that has since been emulated — unsuccessfully — across the globe. A beacon of liberty housing a great line of liberals such as William Hutt, Friedrich Hayek, Edwin Cannan, and Arthur Seldon, among others. The cornerstone to stability is tradition and prosperity through peaceful evolutions.

As Ludwig von Mises wrote in 1919, “Living in the same places and having the same attachment to a state do play their role in the development of nationality, but they do not pertain to its essence. It is no different with having the same ancestry.”

What shapes the nation is our individuality. Without individualism, there is no identity.

Originally Posted at https://mises.org/

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