“Speaking truth to power” is not easy when you support that power. Perhaps this is the reason why so few Western historians are willing to tell the whole truth about state crimes during this century.

Last fall the Moscow News reported the discovery by two archaeologist-historians of mass graves at Kuropaty, near Minsk, in the Soviet republic of Byelorussia.  The scholars at first estimated that the victims numbered around 102,000, a figure that was later revised to 250–300,000.  Interviews with older inhabitants of the village revealed that, from 1937 until June 1941, when the Germans invaded, the killings never stopped. “For five years, we couldn’t sleep at night because of all the shooting,” one witness said.

Then in March, a Soviet commission finally conceded that the mass graves at Bykovnia, outside of Kiev, were the result not of the Nazis’ work, as formerly was maintained, but of the industry of Stalin’s secret police. Some 200–300,000 persons were killed at Bykovnia, according to unofficial estimates.

These graves represent a small fraction of the human sacrifice that an elite of revolutionary Marxists offered up to their ideological fetish. How many died under Stalin alone, from the shootings, the terror famine, and the forced-labor camps, is uncertain. Writing in a Moscow journal, Roy Medvedev, the dissident Soviet Marxist, put the number at around 20 million, a figure the sovietologist Stephen F. Cohen views as conservative.  Robert Conquest’s estimate is between 20 million and 30 million, or more,  while Anton Antonov-Ovseyenko suggests 41 million deaths between 1930 and 1941.

By everyone’s account, most of the victims were killed before the United States and Britain welcomed the Soviet Union as their ally, in June 1941. Yet by then, the evidence concerning at least very widespread Communist killings was available to anyone willing to listen.

If glasnost proceeds and if the whole truth about the Lenin and Stalin eras comes to light, educated opinion in the West will be forced to reassess some of its most deeply cherished views. On a minor note, Stalinist sympathizers like Lillian Hellman, Frieda Kirchwey, and Owen Lattimore will perhaps not be lionized quite as much as before. More important, there will have to be a reevaluation of what it meant for the British and American governments to have befriended Soviet Russia in the Second World War and heaped fulsome praise on its leader. That war will inevitably lose some of its glory as the pristinely pure crusade led by the larger-than-life heroes Winston Churchill and Franklin D. Roosevelt. Inevitably, too, comparisons with what is commonly known as the Holocaust will emerge.

The “Dispute of Historians”

Such comparisons have been at the center of the raging controversy in the Federal Republic of Germany that has been labeled the Historikerstreit, or dispute of historians, and has now become an international cause célèbre. It erupted primarily because of the work of Ernst Nolte, of the Free University of Berlin, author of the highly acclaimed Three Faces of Fascism, published in the United States in 1966. In several important essays, in a large book published in 1987, The European Civil War, 1917–1945, and in a volume of responses to his critics, Nolte declined to treat the Nazi massacre of the Jews in the conventional fashion.

“These graves represent a small fraction of the human sacrifice that an elite of revolutionary Marxists offered up to their ideological fetish.”

He refused, that is, to deal with it metaphysically, as a unique object of evil, existing there in a small segment of history, in a nearly perfect vacuum, with at most merely ideological links to racist and Social Darwinist thought of the preceding century. Instead, without denying the importance of ideology, he attempted to set the Holocaust in the context of the history of Europe in the first decades of the 20th century. His aim was in no way to excuse the mass murder of the Jews, or to diminish the guilt of the Nazis for this crime dreadful beyond words. But he insisted that this mass murder must not lead us to forget others, particularly those that might stand in a causal relationship to it.

Briefly, Nolte’s thesis is that it was the Communists who introduced into modern Europe the awful fact and terrifying threat of the killing of civilians on a vast scale, implying the extermination of whole categories of persons. (One Old Bolshevik, Zinoviev, spoke openly as early as 1918 of the need to eliminate 10,000,000 of the people of Russia.) In the years and decades following the Russian Revolution, middle-class, upper-class, Catholic, and other Europeans were well aware of this fact, and for them especially the threat was a very real one. This helps to account for the violent hatred shown to their own domestic Communists in the various European countries by Catholics, conservatives, fascists, and even Social Democrats.

Nolte’s thesis continues: those who became the Nazi elite were well-informed regarding events in Russia, via White Russian and Baltic German émigrés (who even exaggerated the extent of the first, Leninist atrocities). In their minds, as in those of right-wingers generally, the Bolshevik acts were transformed, irrationally, into Jewish acts, a transformation helped along by the existence of a high proportion of Jews among the early Bolshevik leaders. (Inclined to anti-Semitism from the start, the rightists ignored the fact that, as Nolte points out, the proportion among the Mensheviks was higher, and, of course, the great majority of the European Jews were never Communists.) A similar, ideologically mandated displacement, however, occurred among the Communists themselves: after the assassination of Uritsky and the attempted assassination of Lenin by Social Revolutionaries, for instance, hundreds of “bourgeois” hostages were executed.

The Communists never ceased proclaiming that all of their enemies were tools of a single conspiracy of the “world bourgeoisie.”

The facts regarding the Ukrainian terror famine of the early 1930s and the Stalinist gulag were also known in broad outline in European right-wing circles. When all is said and done, Nolte concludes, “the Gulag came before Auschwitz.” If it had not been for what happened in Soviet Russia, European fascism, especially Nazism and the Nazi massacre of the Jews,  would most probably not have been what they were.

The Onslaught on Nolte

Nolte’s previous work on the history of socialism could hardly have made him persona grata with leftist intellectuals in his own country. Among other things, he had emphasized the archaic, reactionary character of Marxism and the anti-Semitism of many of the early socialists, and had referred to “liberal capitalism” or “economic freedom,” rather than socialism, as “the real and modernizing revolution.”

The attack on Nolte was launched by the leftist philosopher Jürgen Habermas, who took issue not with Nolte’s historiography — his essays showed that Habermas was in no position to judge this — but with what he viewed as its ideological implications. Habermas also targeted a couple of other German historians, and added other points, like the plan to establish museums of German history in West Berlin and in Bonn, to the indictment. But Nolte and his thesis have continued to be at the center of the Historikerstreit. He was accused of “historicizing” and “relativizing” the Holocaust and chided for questioning its “uniqueness.”

Several of the biggest names among academic historians in the Federal Republic, and then in Britain and America as well, joined in the hunt, gleefully seizing upon some of Nolte’s less felicitous expressions and weaker minor points. In Berlin, radicals set fire to his car; at Oxford, Wolfson College withdrew an invitation to deliver a lecture, after pressure was applied, just as a major German organization dispensing research grants rescinded a commitment to Nolte under Israeli pressure. In the American press, ignorant editors, who couldn’t care less anyway, now routinely permit Nolte to be represented as an apologist for Nazism.

It cannot be said that Nolte has demonstrated the truth of his thesis — his achievement is rather to have pointed out important themes that call for further research — and his presentation is in some respects flawed. Still, one might well wonder what there is in his basic account to justify such a frenzy. The comparison between Nazi and Soviet atrocities has often been drawn by respected scholars. Robert Conquest, for instance, states,

For Russians — and it is surely right that this should become true for the world as a whole — Kolyma [one part of the Gulag] is a word of horror wholly comparable to Auschwitz … it did indeed kill some three million people, a figure well in the range of that of the victims of the Final Solution.

Others have gone on to assert a causal connection. Paul Johnson maintains that important elements of the Soviet forced-labor camps system were copied by the Nazis, and posits a link between the Ukrainian famine and the Holocaust:

The camps system was imported by the Nazis from Russia.… Just as the Roehm atrocities goaded Stalin into imitation, so in turn the scale of his mass atrocities encouraged Hitler in his wartime schemes to change the entire demography of Eastern Europe … Hitler’s “final solution” for the Jews had its origins not only in his own fevered mind but in the collectivization of the Soviet peasantry.

Nick Eberstadt, an expert on Soviet demography, concludes that “the Soviet Union is not only the original killer state, but the model one.”  As for the tendency among European rightists after 1917 to identify the Bolshevik regime with the Jews, there is no end of evidence.  Indeed, it was an immensely tragic error to which even many outside of right-wing circles were liable. In 1920, after a visit to Russia, Bertrand Russell wrote to Lady Ottoline Morell:

Bolshevism is a closed tyrannical bureaucracy, with a spy system more elaborate and terrible than the Tsar’s, and an aristocracy as insolent and unfeeling, composed of Americanised Jews.

But, despite the existence of a supporting scholarly context for Nolte’s position, he remains beleaguered in his native land, with only isolated individuals, like Joachim Fest, coming to his defense. If recent English-language publications are a reliable indication, his situation will not improve as the controversy spreads to other countries.

Why Did the Heavens Not Darken?

The recent work by Arno J. Mayer, of Princeton, Why Did the Heavens Not Darken?   is in some respects informative;  ​ above all, however, it is a perfect illustration of why Nolte’s work was so badly needed.

We can leave aside Mayer’s approach to the origins of the “Judeocide” (as he calls it), which is “functionalist” rather than “intentionalist,” in the current jargon, and which provoked a savage review.  What is pertinent here is his presentation of the killing of the European Jews as an outgrowth of the fierce hatred of “Judeobolshevism” that allegedly permeated all of German and European ‘’bourgeois’’ society after 1917, reaching its culmination in the Nazi movement and government. This approach lends support to Nolte’s thesis.

The problem, however, is that Mayer offers no real grounds for the bitter hatred that so many harbored for Bolshevism, aside from the threat that Bolshevism abstractly posed to their narrow and retrograde “class interests.” Virtually the only major Soviet atrocity even alluded to in the 449 pages of text (there are, oddly and inexcusably, no notes)  is the deportation of some 400,000 Jews from the territories annexed after the Hitler-Stalin pact. Even here, however, Mayer hastens to reassure us that the policy was “not specifically anti-Semitic and did not preclude assimilated and secularized Jews from continuing to secure important positions in civil and political society … a disproportionate number of Jews came to hold posts in the secret police and to serve as political commissars in the armed service.” Well, mazel tov.

The fear and loathing of Communism that Poles, Hungarians, and Romanians, for instance, felt in the interwar period, strongly endorsed by their national churches, is qualified by Mayer as an “obsession.” With Mayer, fear of Communism is always “obsessional” and limited to the “ruling classes,” prey to an anti-Bolshevik “demonology.” But the recourse to clinical and theological terms is no substitute for historical understanding, and Mayer’s account — Soviet Communism with the murders left out — precludes such understanding.

Consider the case of Clemens August Count von Galen, Archbishop of Munster.

As Mayer notes, Galen led the Catholic bishops of Germany in 1941 in publicly protesting the Nazi policy of murdering mental patients. The protest was shrewdly crafted and proved successful: Hitler suspended the killings. Yet, as Mayer further notes, Archbishop Galen (deplorably) “consecrated” the war against Soviet Russia. Why?

To cite another example: Admiral Horthy, the Regent of Hungary, was an opponent of murdering the Jews and attempted, within his limited means, to save the Jews of Budapest. Yet he continued to have his troops fight against the Soviet and alongside the Germans long after the coming defeat was obvious. Why? Could it possibly be that, in both cases, the previous bloody history of Soviet Communism had something to do with their attitude? In Mayer’s retelling, Crusader murders in Jerusalem in the year 1096 are an important part of the story, but not Bolshevik murders in the 1920s and ‘30s.

Allegations of Soviet crimes do appear in Mayer’s book. But they are put in the mouths of Hitler and Goebbels, with no comment from Mayer, thereby signaling their “fanatical” and “obsessional” character, e. g., “the führer ranted about bolshevism wading deeper in blood than tsarism” (actually, Hitler’s claim here is hardly controversial).

In fact, it seems likely that Mayer simply does not believe that there were anything approaching tens of millions of victims of the Soviet regime. He writes, for instance, of “an iron nexus between absolute war and large-scale political murder in eastern Europe.” But most of the large-scale Stalinist political murders occurred when the Soviet Union was at peace. The massive upheavals, with their accompanying terror and mass killings, that characterized Soviet history in the 1920s and 30s, Mayer refers to in almost unbelievably anodyne terms as “the general transformation of political and civil society.” In other words, Mayer gives every evidence of being a Ukrainian famine, Great Terror, and gulag “revisionist.” This is an aspect of Mayer’s book that the reviewers in the mainstream press had an obligation to point out but omitted to do so.

Mayer has no patience with any suggestion that great crimes may have been committed against Germans in the Second World War and its aftermath. Here he joins the vast majority of his contemporaries, professional and lay alike, as well as the Nuremberg Tribunal itself.

Taboo War Crimes — the Allies’

If Soviet mass atrocities provide a historical context for Nazi crimes, so does a set of crimes that few, inside or outside the Federal Republic, seem willing to bring into the debate: the ones perpetrated, planned, or conspired to by the Western Allies.

There was, first of all, the policy of terror bombing of the cities of Germany, begun by the British in 1942. The Principal Assistant Secretary of the Air Ministry later boasted of the British initiative in the wholesale massacring of civilians from the air.  Altogether, the RAF and US Army Air Corps killed around 600,000 German civilians,  whose deaths were aptly characterized by the British military historian and Major-General J.F.C. Fuller as “appalling slaughterings, which would have disgraced Attila.”   A recent British military historian has concluded: “The cost of the bomber offensive in life, treasure, and moral superiority over the enemy tragically outstripped the results that it achieved.”

The planned, but aborted, Allied atrocity was the Morgenthau Plan, concocted by the US Secretary of the Treasury, Henry Morgenthau, and initialed by Roosevelt and Churchill at the Second Quebec Conference, in September 1944. The Plan aimed to transform postwar Germany into an agricultural and pastoral country, incapable of waging war because it would have no industry. Even the coal mines of the Ruhr were to be flooded. Of course, in the process tens of millions of Germans would have died. The inherent insanity of the plan very quickly led Roosevelt’s other advisors to press him into abandoning it, but not before it had become public (as its abandonment did not).

Following upon the policy of “unconditional surrender” announced in early 1943, the Morgenthau Plan stoked the Nazi rage. “Goebbels and the controlled Nazi press had a field day … ‘Roosevelt and Churchill agree at Quebec to the Jewish Murder Plan,’ and ‘Details of the Devilish Plan of Destruction: Morgenthau the Spokesman of World Judaism.”

There are two further massive crimes involving the Allied governments that deserve mention (limiting ourselves to the European theater). Today it is fairly well-known that, when the war was over, British and American political and military leaders directed the forced repatriation of hundreds of thousands of Soviet subjects (and the surrender of some, like the Cossacks, who had never been subjects of the Soviet state). Many were executed, most were channeled into the gulag. Solzhenitsyn had bitter words for the Western leaders who handed over to Stalin the remnants of Vlasov’s Russian Army of Liberation:

In their own country, Roosevelt and Churchill are honored as embodiments of statesmanlike wisdom. To us, in our Russian prison conversations, their consistent shortsightedness and stupidity stood out as astonishingly obvious … what was the military or political sense in their surrendering to destruction at Stalin’s hands hundreds of thousands of armed Soviet citizens determined not to surrender.

Of Winston Churchill, Alexander Solzhenitsyn wrote:

He turned over to the Soviet command the Cossack corps of 90,000 men. Along with them he also handed over many wagonloads of old people, women, and children.… This great hero, monuments to whom will in time cover all England, ordered that they, too, be surrendered to their deaths.

The great crime that is today virtually forgotten was the expulsion starting in 1945 of the Germans from their centuries-old homelands in East Prussia, Pomerania, Silesia, Sudetenland, and elsewhere. About 16 million persons were displaced, with about 2 million of them dying in the process.  This is a fact, which, as the American legal scholar Alfred de Zayas dryly notes, “has somehow escaped the attention it deserves.” While those directly guilty were principally the Soviets, Poles, and Czechs (the last led by the celebrated democrat and humanist, Eduard Benes), British and American leaders early on authorized the principle of expulsion of the Germans and thus set the stage for what occurred at the war’s end. Anne O’Hare McCormick, the New York Times correspondent who witnessed the exodus of the Germans, reported in 1946:

The scale of this resettlement and the conditions in which it takes place are without precedent in history. No one seeing its horrors firsthand can doubt that it is a crime against humanity for which history will exact a terrible retribution.

McCormick added: “We share responsibility for horrors only comparable to Nazi cruelties.”

Bringing All State Terrorists to Account

In the Federal Republic today, to mention any of these Allied — or even Soviet — crimes in the same breath with the Nazis is to invite the devastating charge of attempting an Aufrechnen — an offsetting, or balancing against. The implication is that one is somehow seeking to diminish the Nazis’ undying guilt for the Holocaust by pointing to the guilt of other governments for other crimes. This seems to me to be a thoroughly warped perspective.

All mass murderers — all of the state terrorists on a grand scale, whatever their ethnicity or that of their victims — must be arraigned before the court of history. It is impermissible to let some of them off the hook, even if the acts of others may be characterized as unique in their brazen embrace of evil and their sickening horror. As Lord Acton said, the historian should be a hanging judge, for the muse of history is not Clio, but Rhadamanthus, the avenger of innocent blood.

There was a time in America when well-known writers felt an obligation to remind their fellow citizens of the criminal misdeeds of their government, even against Germans. Thus, the courageous radical Dwight Macdonald indicted the air war against German civilians during the war itself.  On the other side of the spectrum, the respected conservative journalist William Henry Chamberlin, in a book published by Henry Regnery, assailed the genocidal Morgenthau Plan and labeled the expulsion of the eastern Germans “one of the most barbarous actions in European history.”

Nowadays the only publication that seems to care about these old wrongs is the Spectator (the real one, of course), which happens also to be the best-edited political magazine in English. The Spectator has published articles by British writers honorably admitting the shame they felt upon viewing what remains of the great cities of Germany, once famed in the annals of science and art. Other contributors have pointed out the meaning of the loss of the old German populations of the area that is today again being fashionably referred to as Mitteleuropa. A Hungarian writer, G.M. Tamas, recently wrote,

The Jews were murdered and mourned.… But who has mourned the Germans? Who feels any guilt for the millions expelled from Silesia and Moravia and the Volga region, slaughtered during their long trek, starved, put into camps, raped, frightened, humiliated?… Who dares to remember that the expulsion of the Germans made the communist parties quite popular in the 1940s? Who is revolted because the few Germans left behind, whose ancestors built our cathedrals, monasteries, universities, and railway stations, today cannot have a primary school in their own language? The world expects Germany and Austria to “come to terms” with their past. But no one will admonish us, Poles, Czechs, and Hungarians, to do the same. Eastern Europe’s dark secret remains a secret. A universe of culture was destroyed.

More remarkably still, Auberon Waugh drew attention to the fervid support given by British leaders to the Nigerian generals during the Civil War (1967–70), at a time “when the International Red Cross assured us that 10,000 Biafrans a day were dying of starvation,” victims of a conscious, calculated policy.  His observation was a propos of the massacre in Tiananmen Square and the nearly universal execration of the Chinese leaders; it was a telling one.

In fact, both the Soviet and Nazi mass murders must be placed in a wider context. Just as it is unlikely that Nazi racist ideology of itself can account for the murder of the Jews — and so many others — so Leninist amoralism is probably not enough to account for Bolshevik crimes. The crucial intervening historical fact may well be the mass killings of the First World War — of millions of soldiers, but also of thousands of civilians on the high seas by German submarines and of hundreds of thousands of civilians in central Europe by the British hunger blockade.    Arno Mayer makes the important point in regard to World War I that “this immense bloodletting … contributed to inuring Europe to the mass killings of the future.” He means this in connection with the Nazis, but it probably also holds for the Communists themselves, witnesses to the results of a war brought about by “capitalist imperialism.” None of this, of course, excuses any of the subsequent state criminals.

In fact, all great states in this century have been killer states, to a greater or lesser degree. Naturally, the “degree” matters — sometimes very much. But it makes no sense to isolate one mass atrocity, historically and morally, and then to concentrate on it to the virtual exclusion of all others. The result of such a perverted moralism can only be to elevate to the status of hero leaders who badly wanted hanging, and to bolster the sham rectitude of states that will be all the more prone to murder since history “proves” that they are the “good” states.

[First published as “The Taboo Against Truth: Holocausts and the Historians,” Liberty, September 1989.]

Image credit: Stalin with German foreign minister Joachim von Ribbentrop, 1939. CC BY-SA 3.0 DE, German Federal Archive, via Wikimedia. 

Originally Posted at https://mises.org/

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Originally Posted at https://mises.org/

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The First Amendment: Essays on the Imperative of Intellectual Freedom

by Tara Smith, Onkar Ghate, Gregory Salmieri, and Elan Journo

Ayn Rand Institute Press, 2024

418 pp.

What is the source of human rights? Are they derived from man’s nature, or are they simply privileges that the government grants to its citizens? Or is some intermediate view also an option? According to Murray Rothbard and Ayn Rand, the first of these positions is correct.

Tara Smith—the principal author of the essays collected in The First Amendment and a philosopher who teaches at the University of Texas at Austin—is a leading member of the Ayn Rand Institute, and her collaborators are associated with it as well. You would anticipate that they would support the former view (i.e., that human beings have natural rights) and you will, in fact, find a number of statements in the book where the authors say just that. But these statements cannot be taken at face value. It turns out that the government defines the boundaries of rights. In practice, you have the “rights” the government says you do. Smith says:

A government enjoys a unique kind of authority, namely, to make people do as it says regardless of whether or not they want to. The authority to coerce people’s compliance with its rules is justified only to achieve a specific mission: the protection of individual rights…their overriding purpose. The reason a legal system holds its power in turn constrains its legitimate work. A proper, legally valid legal system will do all that is necessary to accomplish that end and only what is necessary to accomplish that end.

The question at once arises, what are these rights, and here is where Smith goes down the road to perdition. Here is an example that makes evident what is wrong. Suppose the Fourteenth Amendment, as interpreted by the courts, forbids owners of a business to discriminate against customers because they are gay. If so, the owner of a bakery cannot refuse to bake a cake for a same-sex couple, even if doing so violates his religious convictions.

The obvious question to ask here is whether the amendment, thus interpreted, is part of the objectively correct law code and the answer to it is equally obvious. People do not have a natural right against discriminatory treatment. If that is true, the Fourteenth Amendment is not an objectively valid law. But Smith proceeds another way. For her, the issue is not “what is objectively valid law” but rather what the government enacts as law, so long as the government acts conscientiously:

Let’s assume that the Fourteenth Amendment’s doctrine represents the government’s conscientious best judgment as to what is required to fulfill its responsibility of safeguarding individual rights. If that is so, the government must enforce that judgment in order to accomplish its work. For it to do anything less would damage its ability to fulfill its role and betray its responsibility.

This is truly Orwellian: There is an objective law code that specifies what rights people have. But even if the government acts contrary to that code, so long as the government uses its “best judgment,” that is the law people are bound to obey.

We see an even more blatant example of this twisted logic in an essay by Gregory Salmieri. He says:

Public education appropriates money for tax purposes to promulgate opinions that may be anathema to them, and it forces parents to surrender their children to be educated in state-run or state-approved institutions, in accordance with curricula chosen by the state. Such laws collectivize and so politicize the field of education… The entire public education system should be abolished.

It should be, but it is up to the government to decide whether to do so, and if it decides to retain public education, people must obey it. The government’s subjective judgment is the law and the condemnation of public education is useless. People who oppose the state’s mandate for education do have the right to protest—of course, within whatever limits the state conscientiously decides are best.

Salmieri confuses two separate issues: one is whether a law should allow exceptions or instead be applicable to everyone and the other is whether promulgation by the government is a sufficient condition for people to have a duty to comply with a law. Salmieri is so afraid of people exercising individual judgment about the validity of a law that he, in practice, replaces the objective law code with the government’s fiat.

Smith, like Salmieri, worships the imperative force of law. If the government ruled out a male-only priesthood, the Roman Catholic Church would have to comply. It could refuse to do so and suffer the legal consequences; but the validity of the law, once promulgated by the government, is unquestioned. In like fashion, the government can conscript people into the armed services. The fact that this is slavery does not matter. So much for self-ownership!

Smith also exalts the state. She camouflages state power by hypocritically pretending she supports natural rights:

The fundamental reason that Americans are legally entitled to religious freedom. . .is not because the First Amendment says so. If that textual statement were its fundamental platform, we would possess only those rights explicitly mentioned in the Constitution. A right to travel? To marry? To raise children? To pursue the career we choose? The Constitution does not say anything about these. Should we conclude that we do not possess these rights? Hardly. The fact that we do not testifies to our recognition that it is not any list in the Constitution that is the source of our rights (not as their moral source.)

Once more, there is a natural law, but it is the government’s role to tell you what to do and you must obey. This is not a position that any lover of liberty can accept.

Originally Posted at https://mises.org/

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According to the most recent report from the federal government’s Bureau of Labor Statistics, the US economy added 142,000 jobs during August while the unemployment rate fell slightly to 4.2 percent. Since the highly disappointing July jobs report, media reports on the state of the job market have become far less positive. This report was described by CNN as “mixed news.”

Yet, the employment situation has not fundamentally changed from what has been common over the past year. Claims of solid, or even “blowout,” gains in employment throughout most of the past year have always been unconvincing if we look at the bigger picture. August’s “mixed” jobs report simply shows a continuation of the gradually weakening employment market that we have been seeing for months.

The lackluster nature of the employment market has been masked in these reports by a focus on a single data point within the report: the establishment survey’s total jobs number. Most reporting on August’s jobs numbers, for example, has ignored the fact that, according to the federal government’s household survey, the number of employed people in America has fallen over the past year. Moreover, the household survey suggests that much of the growth in “jobs” added by the establishment survey are due to made-up numbers created through the so-called “birth-death model” which simply assumes into existence hundreds of thousands of jobs created by hypothetical new businesses.

Let’s take a closer look.

Establishment Survey vs. Household Survey 

The establishment survey report shows that total jobs—a total that includes both part-time and full-time jobs—increased, month over month, in August by 142,000. The establishment survey measures only total jobs, however, and does not measure the number of employed persons. That means that even when job growth comes mostly from people working multiple part-time jobs, the establishment survey shows increases while the total number of employed persons does not. In fact, total employed persons can fall while total jobs increases. For instance, the total number of employed persons has fallen by 66,000 since August of 2023. This is in contrast to a gain of 2.3 million “jobs” in the establishment survey over the same period.

This is the first time the total number of employed workers has been negative, year over year, since the Covid recession of 2020. Whenever this measure turns negative, the US is either in recession or headed toward recession.

Moreover, if we look at the total increase in both measures of employment over the past three years, we find a gap has opened and persisted over more than two years. Indeed, as of the August report, the gap is at 4.2 million. In other words, since January 2021, the establishment survey has shown by nearly 16 million new jobs while the household survey has shown less than 12 million new employed persons. The graph of this gap shows how growth in employed persons has flatlined over the past fourteen months.

Which survey offers a better picture? Back in June, Bloomberg’s chief economist Anna Wong suggested the establishment survey is suspect, writing: “We believe the [household survey] currently offers a closer approximation of reality than [the establishment survey], as BLS’ model for estimating business births and deaths … is lagging the reality of surging establishment closures and falling business formation.”

(In August, that birth-death model added 100,000 jobs to the payrolls total.)

Assuming that the establishment survey is a realistic picture of the economy at all, then the current economy is producing many more jobs than actual workers.

A Recession in Full-Time Jobs

The economy is apparently adding far more part-time jobs than it is adding full-time jobs. In fact, the economy is rapidly shedding full-time jobs, and full-time job measures point to recession.

Over the past year, for example, total part-time jobs increased by 1.05 million. During the same period, full-time jobs fell by 1.02 million. In other words, net job creation during that period has been virtually all part-time. In the month of August alone, workers reported a gain of 527,000 part-time positions while full-time jobs fell by 438,000.

Year over year, total full-time employees fell 0.8 percent. Over the past five months, in fact, the year-over-year measure of full-time jobs has been in recession territory. Full-time jobs have now been down, year over year, in every month since February. Over the past fifty years, three months in a row of negative growth in full-time jobs has always been a recession signal and has occurred when the United States has been in recession, or about to enter a recession:

The full-time jobs indicator now reflects what we’ve seen in temporary jobs for months. For decades, whenever temporary help services are negative, year over year, for more than three months in a row, the US is headed toward recession. This measure has now been negative in the United States for the past twenty-two months. Temporary jobs in August were down by 5.2 percent.

Not surprisingly, other measures of employment point to a weakening economy. For example, in contrast to the headline unemployment rate, August’s U-6 measure of under-employment rose to 7.9 percent, a 35-month high, Job openings in the construction sector have experienced a historic collapse, dropping from 456,000 in February 248,000 in August.

If we take a larger look around, we find plenty of worrisome data in the leading indicators: The Philadelphia Fed’s manufacturing index is in recession territory. The same is true of the Richmond Fed’s manufacturing survey. The Conference Board’s Leading Indicators Index continues to point to recession. The yield curve points to recession. Net savings has now been negative for six quarters in a row. (That hasn’t happened since the Great Recession.) The economic growth we do see is being fueled by the biggest deficits since covid.

Having accepted that the economic and employment outlook is hardly positive, the debate is now over how much the Federal Reserve’s FOMC will cut the target policy interest rate at the FOMC’s September meeting. Ever since July’s jobs report, Fed policymakers have repeatedly signaled they plan to cut the federal funds rate soon. This, however, only points all the more to an impending recession. Recessions usually follow Fed rate cuts.

In spite of continued claims that the Fed will “engineer” a “soft landing,” the Fed has never succeeded in doing so. Ever.

The Fed’s lack of success in this regard isn’t because the Fed is unlucky or bad at timing its rate cuts. The problem stems from the fact that in situations like we are now in, the Fed only has two policy choices: it has to choose between rising price inflation or recession.

Experience shows that the Fed tends to prefer price inflation, and the Fed would rather force down interest rates and pursue easy-money policies all the time. The reason the Fed can’t do this is because easy-money policies cause place inflation, which often becomes a political problem for the regime.

So, when price inflation rises to politically unsustainable levels, the Fed must allow interest rates to rise and cut back on its easy-money policies. But, as Mises showed, an easy-money-addicted economy (such as the one we are now in) will enter the bust phase of the business cycle once there is less new money entering the economy. The only way the Fed can prevent a continued worsening in economic conditions right now is to turn back to easy money and again flood the economy with liquidity. However, the economy is now barely past a period of historically high levels of monetary inflation—i.e., “money printing.” A return to easy money will cause a new surge in rising prices. This is what happened in the 1970s during the Arthur Burns years. The Burns Fed tried to create a soft landing, but only succeeded in creating stagflation.

These are the options the Fed now faces. There is no soft landing coming.

Originally Posted at https://mises.org/

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In a recent interview with CNN, Kamala Harris said that Bidenomics is working and that she is “proud of bringing inflation down.”

However, the Bureau of Labor Statistics published the latest CPI at 2.9%, despite annual inflation being 1.4% when she took office. Inflation is a disguised tax and accumulated inflation since January 2021, when the Biden-Harris administration started, has increased more than 20%.

Of course, Democrats blame inflation on the war, the pandemic, and the science-fantasy concept of “supply chain disruptions.” No one believed it, because most commodities have declined and supply tensions disappeared back to normality, but prices continued to rise.

As a result, Harris invented the concept of greedy grocery stores and evil corporations to blame for inflation and justify price controls. Is it not ironic? She blames grocery stores and corporations for inflation, but when price inflation drops, she proudly takes credit.

The reality is that the Kamala Harris plan, like all interventionist governments, creates and strives for inflation. Inflation is a hidden tax. Governments love it and perpetuate it by printing money through deficit spending and imposing regulations that harm trade, competition, and technological creative destruction. Big government is big inflation.

Inflation is the way in which the government tricks citizens into believing that administrations can provide for anything. It disguises the accumulated debt, quietly transfers wealth from the private sector to the government and condemns citizens to being dependent hostages of government subsidies. It is the only way in which they can continue to spend a constantly depreciated currency and present themselves as the solution. Furthermore, it is the perfect excuse to blame businesses and anyone else who sells in the currency that the government creates.

Kamala Harris will do nothing to cut inflation because she wants inflation to disguise the monster deficit and debt accumulation. In the latest figures, the deficit has soared to $1.5 trillion in the first ten months of the fiscal year. Public debt has soared to $35 trillion, and in the administration’s own forecasts, they will add a $16.3 trillion deficit from 2025 to 2034. It is worse. The previously mentioned figure does not include the $2 trillion in additional debt coming from Kamala’s economic plan.

Harris is aware that her proposals to impose an unrealized capital gains tax, an economic aberration, and other tax hikes will not generate the $2 trillion in additional taxes she seeks. So, she needs the Fed to monetize as much as possible, eroding the US dollar’s purchasing power and making all Americans poorer in the process, only to blame corporations and grocery stores later. Furthermore, it is a way to present the government as the solution to the problem they create, promising the lunacy of price controls and enormous subsidies in a constantly depreciated currency.

It is a perfect plan to nationalize the economy in the style of Peronist socialism in Argentina.

Increase spending, deficits, and debt, making the size of government larger on the way in. Monetize as much debt as possible and cut rates to make it easier for the bankrupt government to borrow. When deficits balloon and inflation soars, increase taxes to the private sector and hike rates, which increases further the size of government in the economy. And you blame corporations?

Governments do not reduce prices. Governments create and perpetuate inflation by printing currency that loses value every year.

Corporations, landlords, and grocery stores do not create or increase inflation; they reduce it through competition and efficiency. Even if all corporations, grocery stores, and landlords were evil and stupid at the same time, they would not make aggregate prices rise and consolidate a constant trend of increases. For the same quantity of money, even a monopoly would not be able to increase aggregate prices. The only one that can make aggregate prices rise, consolidate, and continue increasing, although at a slower pace, is the government issuing and printing more currency than the private sector demands.

By admitting that the deficit will soar by $16.3 trillion in ten years in a budget that expects record revenues, no recession, and continued employment growth, the Harris team is conceding that they will strive for inflation to dilute the currency in which that debt is issued… and make you poorer.

Interventionists argue that the government does not have a budget constraint, only an inflation constraint, and can always tax the excess money in the system. Beautiful. This implies an increase in the size of the government during periods of economic expansion and further government expansion during periods of perceived normalcy. The government receives an enormous transfer of wealth from the productive sector, resulting in the creation of a dependent citizen class.

High taxes are not a tool to reduce debt. High debt and high taxes are tools to confiscate the productive sector’s wealth and create a subclass of dependent citizens.

Socialism redistributes middle-class wealth to bureaucrats, not rich to poor.

Massive government spending, constantly increasing taxes, and printing money. A plan to reduce the economy to serfdom.

Harris’ economic plan is not aiming to reduce inflation but to perpetuate it. Indeed, this economic policy mirrors Argentina’s 21st-century socialism, and it threatens the US dollar’s status as the world’s reserve currency. The government does not determine the level of confidence in a currency. When confidence in a currency declines, it does so quickly. Saying it will not happen in the US because it has not occurred yet is the equivalent of driving at 200mph and saying, “We have not killed ourselves yet; accelerate.”

Originally Posted at https://mises.org/

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If one has the patience or the curiosity to go down certain conservative rabbit holes in social media, one will encounter a small corner of the movement in which one finds a latent or explicit desire to somehow rehabilitate Adolf Hitler and the National Socialists (i.e., the “Nazis.”)

This is often found in the form of comments or memes that take the position that the National Socialists were the defenders of “the West” against a militant Left then growing in Europe. For example, note the below meme with the phrase “I tried to save you” superimposed over Hitler’s face. This image and similar images are generally accompanied by comments to the effect that Western Europe would somehow today be better off if the National Socialists had managed to implement their preferred regime type across Europe. The overall message is that Hitler was some sort of twentieth-century Joseph De Maistre seeking to defend Europe from the wrecking ball of the Left’s revolutionaries.

But, I have some bad news for these self-proclaimed defenders of “tradition.” The National Socialists were not in favor of traditional Western institutions. Far from being the enemies of the revolutionary Left, the National Socialists were the Left, only committed to a slightly different type of totalitarianism than the Leninist Left.

The National Socialists were—as the name would suggest—socialists. Moreover, they were totalitarian socialists, and their institutional model was Soviet totalitarianism.

This has been shown in detail in Hannah Arendt’s book The Origins of Totalitarianism. Arendt notes that Hitler and the National Socialists generally held in contempt the fascist dictatorships of Europe—i.e., the Baltic states, Hungary, Spain, and others—for falling much too short of the totalitarian model. In contrast, Arendt writes, the National Socialists expressed “genuine admiration for the Bolshevik regime in Russia (and the Communist Party in Germany)…”

Destroying the West to Save It

Thus, it is not surprising when Arendt contends that “Hitler never intended to defend ‘the West’ against Bolshevism but always remained ready to join ‘the Reds’ for the destruction of the West, even in the middle of the struggle against Soviet Russia.”

Hitler, of course, hated all Westerners who did not subscribe to his revolutionary ideology. This is the man who ordered the complete destruction of the city of Paris when it became clear that the Wehrmacht would be driven out of northern France. Hitler is also the man who issued the Nero Decree which ordered that all infrastructure in Germany—including that necessary to feed civilians—be destroyed in an effort to slow down the Allies. According to several accounts from his staff, Hitler was unconcerned by the fact this would reduce the German population to a state of utter starvation. For Hitler, German civilization did not deserve to survive since it had failed in its war against the Slavs and other presumed inferiors of Europe.

It’s an odd “defender of the West” who seeks to starve millions of Westerners to death.

Indeed, had Hitler any real regard for preserving Western institutions from the Bolsheviks, he would certainly never have invaded Poland. After all, by the 1930s, it was the Poles—not the Germans—who had become the primary eastern bulwark against the westward spread of Soviet communism.

(The fact that Bolsheviks controlled Russia, of course, was yet another one of Germany’s “gifts” to the world. Had the German Imperial army not destroyed the Tsar’s army in 1918, Lenin would have never been able to take control of the Russian state.)

In the years that followed the First World War, it was the Poles who fought back against the Bolsheviks after Lenin annulled the Treaty of Brest-Litovsk and pushed the Soviet frontier westward in 1919. It was the Poles who heroically stopped the Soviet advance at the Battle of Warsaw in 1920, forcing the Soviets to sue for peace and abandon Lenin’s grandiose plans for Bolshevik conquests in Europe.

Were Hitler interested in weakening Soviet power, he would have, at the very least, sought a stronger Poland as a buffer state between central Europe and the Soviet east. Instead, Hitler signed a treaty with the Soviets designed to destroy Poland and hand over eastern Poland to Soviet communists.

In reality, Hitler was hardly concerned with defending Western civilization, but was driven by far more parochial concerns centered on taking back Danzig from the Poles and subjugating the “inferior” Polish Slavs. Polish racial inferiority, of course, was explicit in Nazi law and Nazi ideology. Heinrich Himmler was sure to leave no doubt of this when he said the policy was to ensure “All Poles will disappear from the world … the great German people should consider it as its major task to destroy all Poles.”

If the National Socialists were so concerned with preserving traditional Western values, it difficult to see how this could possibly be compatible with the extermination of the Poles. After all, Poland was the most significant and reliable outpost of Western civilization in eastern Europe. The Poles were among the most staunch defenders of Latin Christendom. The Poles were the ones who pulled the Habsburgs’ chestnuts from the fire at the Siege of Vienna. During the Cold War, it was the Poles who were a perennial thorn in the side of the Soviet regime—much unlike the comparatively complacent East Germans.

The National Socialists Were Leftists

The fact that the National Socialists were most at home with the revolutionary Left is further explored in detail by the great Austrian polymath Erik von Kuehnelt-Leddihn in his book Leftism: From de Sade and Marx to Hitler and Marcuse.

Kuehnelt-Leddihn was far too well informed to fall for simple-minded theories about Hitler’s alleged good intentions or noble quest to save Christendom.

Regarding Hitler as a “basically mediocre neurotic,” Kuehnelt-Leddihn notes that Hitler “certainly subscribed to Mussolini’s ‘Everything within the State, nothing outside the State, nothing against the State’”—a slogan utterly contrary to traditional Western thought. Hitler had also “drunk from almost the same ideological sources” as socialists like Mussolini, yet this was modified by Hitler’s enthrallment with Czech national socialists. The ideology of the Czech national socialists lent to Hitler many of his core, essentially leftist, beliefs: “anticlericalism, an intimate synthesis between nationalism and socialism, trust in the working class, the peasantry, and the lower middle class, [and] opposition to the nobility.” This ideology was also anti-capitalist and therefore against the bourgeoisie.

The nationalist component of this ideology led to the historical accident of the National Socialists being placed on “the right” even though, as Kuehnelt-Leddihn notes, nationalism was not “conservative” in the European context:

In Germany after World War I, most unfortunately, the National Socialists were seated on the extreme right because to simpleminded people nationalists were rightists, if not conservatives-a grotesque idea when one remembers how antinationalistic Metternich, the monarchical families, and Europe’s ultraconservatives had been in the past. Nationalism, indeed, has been a by-product of the French Revolution (no less so than militarism).

But even for those who find such nuances about nationalism unconvincing, the National Socialist opposition to traditional European institutions can be seen in Nazi hatred for the great conservative power of Europe, the Catholic Church.

Kuehnelt-Leddihn connects Hitler’s anti-Catholicism to his early years living under the conservative Austrian regime which Hitler loathed. After the war, when the Austrian state threatened to arrest Hitler for desertion, this, according to Kuehnelt-Leddihn, “gave further nourishment to Hitler’s hatred for the Catholic Church.”

The realities of National Socialist policy reflect this well, and the Party remained disfavored by the Catholics during the rise of the Third Reich. Kuehnelt-Leddihn writes:

A study of the numerical development of the different parties in the four elections preceding Hitler’s advent to power is most interesting. … Maps which I have published elsewhere show distinctly that religion was a main factor in the territorial growth of National Socialism. … There is no doubt that the Nazi victories were gained primarily with the aid of the Protestant or, to be more precise, the “progressive” post-Protestant areas: A mere glance at the statistical maps proves it.

Once in Power, Hitler’s regime set to work giving the Catholics exactly what they had feared. As with the French Revolutionaries and other totalitarians, the National Socialist regime was committed to de-Christianizing its population. This required that the German state take total control of religious institutions. Churches became de facto state property and there certainly was no freedom of speech or religious practice for Christians. Dissenting clergy of all types were targeted by Hitler’s regime, but Catholic clergy was especially under threat.

For example, Dachau Prison camp contained a barracks specifically dedicated to clergy, where more than 2700 clerics were imprisoned. Nearly 95 percent of these were Catholic clergy. More than a thousand Catholic priests died in Dachau. Non-German clergy fared even worse than those at Dachau. St. Maximilian Kolbe, a Polish citizen, was deliberately starved to death at Auschwitz for political “crimes.”

The National Socialists were more than happy to substitute new religious practices of the variety we’d expect from any leftwing movement today. It’s no surprise that many high-ranking Nazi officials were obsessed with Germanic paganism, occult rituals, and a variety of what we might call “new age” religious beliefs.

Yet, in spite of all the evidence, the “Hitler-tried-to-save-Europe” meme seems to endure among some of those who who fancy themselves as very edgy or contrarian defenders of “Christendom” and “the West.” Moreover, by buying into to the idea of Hitler as some sort of defender of the West, those who favor rehabilitating the National Socialists promote the Left’s propaganda line that the Nazis were conservatives, reactionaries, Christians, or some other type of European traditionalists.

Of course, that shouldn’t surprise us. The National Socialists were never anything better than useful idiots for those who sought to destroy the West. Hitler’s modern-day defenders are no different.

Image Credit: Heinrich Hoffmann, public domain (via Wikimedia.)

Originally Posted at https://mises.org/

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Conventional wisdom has it that the Federal Reserve system (the “Fed”) and the US Treasury Department are two separate entities. Congress created the Fed in 1913 as a legally and financially independent federal agency, privately owned by its member banks, with no funding from the federal budget. The US Treasury, on the other hand, is an Executive-branch cabinet-level department reporting directly to the President, with funding appropriated in the federal budget.

Conventional wisdom also tells us that the Fed’s monetary policy (managing the money supply and interest rates, directed by the Fed’s Chair and Board of Governors) is separate from Treasury’s fiscal policy (collecting taxes and implementing federal spending) at the behest of Congress and the Executive branch).

The modern-day separation of the Treasury and the Fed dates from the 1951 Treasury-Federal Reserve Accord, which established the Fed’s independence from the Treasury. During World War II, the Fed agreed to peg interest rates on short-term Treasury bills at 3/8 of 1%. The Accord clarified the separation between Fed monetary policy and Treasury’s debt-management powers, freeing the Fed to fulfill its dual mandates of price stability and maximum employment.

Confusion Between Monetary Policy and Fiscal Policy

Yet as I discovered teaching senior citizens in the Osher Lifelong Learning Institute, many Americans remain unclear about the Fed’s and Treasury’s respective responsibilities, and how the two entities coordinate when the Fed supplies fresh bank credit to support Treasury’s need for spendable funds.

The Treasury sells bonds to both foreign and domestic investors when federal tax revenues fall short of its spending needs. Once bonds are in the open market, the Fed can then buy them for its own portfolio, creating new bank credit—spendable funds—literally out of “thin air,” sometimes referred to as “monetizing the debt.”

Such Fed credit creation occurred in massive amounts during the 2020-22 Covid era, when the federal government spent $5.2 trillion for congressionally-authorized programs such as enhanced unemployment benefits, employee retention credits, and consumer “stimulus” payments. To accomplish this spending, the Fed cooperatively expanded its balance sheet holdings of securities from $4 trillion to about $9 trillion, using its immense power to create spendable funds. Such massive credit creation arguably caused or exacerbated inflation to over 9% in mid-2022

This Isn’t Your Grandfather’s Monetary and Fiscal Policy

This coordinated Fed-Treasury credit expansion reflects a novel approach to monetary and fiscal policies, as new strategies were developed to satisfy one-off federal spending needs. It began when Ben Bernanke, Fed Chair 2006-14, created Quantitative Easing (QE) during the 2008-09 financial crisis, purportedly to avoid another Great Depression. QE involves massive open-market purchases of Treasury debt—as well as mortgage-backed securities for the first time in the Fed’s history—to flood financial markets with newly-created bank credit in order to support the economy in what was then called the Great Recession.

But There’s More to the Story: “Helicopter Money”

QE might be considered traditional monetary policy on steroids. But another new policy tool might be considered a hybrid of monetary and fiscal policy. Milton Friedman in 1969 first proposed “helicopter money,” a colorful phrase describing a type of stimulus that injects cash into an economy as if it were thrown from a helicopter. Future Fed Chair Bernanke (“Helicopter Ben”) in 2002 referenced helicopter money as a strategy that could be used to avoid price deflation.

A variant of helicopter money was employed during the financial crisis of 2008-09 and again in 2020 during the early months of the Covid pandemic. After Congress authorized consumer “stimulus” payments in the Economic Stimulus Act of 2008, the IRS deposited prescribed amounts into the bank accounts of qualifying taxpayers. Thus, instead of having to scoop up paper currency dropped from helicopters, taxpayers effortlessly received the funds in their bank accounts. In 2008, the IRS deposited payments ranging from $600 per tax filer plus $300 for each qualifying child, for a total of $152 billion.

In 2020 and 2021, Congress authorized three tranches of pandemic stimulus payments, called “economic impact payments”: The CARES Act in March 2020 authorized $1200 per tax filer plus $500 per child; the Consolidated Appropriations Act in December 2020 authorized $600 per filer plus $600 per child; and the American Rescue Plan in March 2021 authorized $1400 per filer plus $1400 per child. All told, these three tranches distributed $814 billion in 476 million separate payments. Although about 40% of the stimulus payments were spent on consumption, 60% of Americans saved the funds or paid down personal debt.

Are QE and Helicopter Money Different?

QE involves an “asset swap” between the Fed and another economic entity. The Fed purchases Treasury bonds or other financial assets from private parties, adding them to its balance sheet and creating new bank credit. With new bank reserves, depository institutions can then increase their own lending activity to businesses and consumers, the intended result being new economic activity boosting GDP. This asset swap is reversible—as Quantitative Tightening (QT)—if the Fed sells financial assets to reduce the amount of credit outstanding.

But helicopter money is different from QE, and economists don’t all agree whether helicopter drops qualify as monetary policy or fiscal policy. Helicopter drops, unlike QE, do not involve an asset swap, since the Fed simply gives away the money created without increasing assets on its balance sheet.

Some Views on QE and Helicopter Money

John Cochrane of Stanford University’s Hoover Institution, considering the Fed to be a vital part of fiscal theory, refers to pandemic spending as “….a one-time $5 trillion fiscal blowout…”, adding that “….the Fed is still important in fiscal theory….[buying] about $3 trillion of the new debt and [converting] it to [bank] reserves.”

Stephen Miran of the Manhattan Institute warns that the Fed has allowed QE to remain in place far too long, engaging in large-scale asset purchases in eleven of the sixteen years since the 2008-09 financial crisis. And recent Fed policy of “run off”—allowing maturing Treasury bonds to leave its balance sheet, as a form of (QT), without replacement by new purchases of like duration—implies that the Fed is intervening in public debt maturity profile decisions that are traditionally left to fiscal authorities. He also describes how the Treasury can interfere in monetary policy, potentially forcing the Fed to sell at large mark-to-market losses on its securities portfolio, rendering QT moot as a monetary policy tool. He opines that, “Allowing Treasury to set monetary policy is extremely dangerous.”

Modern Monetary Theory (MMT)—a fringe movement within economics—claims that instead of creating credit to buy Treasury bonds, the Fed should create money to directly fund public expenditures or tax cuts. Further, MMT’s advocates consider helicopter drops a form of fiscal policy, not monetary policy. The Fed creates the helicopter money, but does not acquire any assets such as Treasury securities in exchange for creating new bank reserves. The Fed simply gives away the created funds, and the Fed’s capital declines. It appears that MMT fans might more accurately brand their cause Modern Fiscal Theory (MFT) rather than MMT. Note that the majority of economists do not accept MMT’s views.

What Lies Ahead for Fed and Treasury?

The distinction today between monetary and fiscal policies is muddled. Some may view this as the Fed’s and Treasury’s interfering in each others’ traditional responsibilities, amidst the advent of new strategies and tools such as QE and helicopter money. Others may view this as overly-zealous cooperation between Fed and Treasury to flood credit markets with too much liquidity that can later result in price inflation and/or the inability to reverse the credit creation process as economic conditions change.

Perhaps it is time for a latter-day Treasury-Fed Accord to clarify the respective responsibilities and limits of the Fed and Treasury. Or, more aptly, it is time for Congress to step up its oversight of both the Fed—the independent agency that Congress created in 1913—and the US Treasury Department, which dates from the earliest days of our Republic.

Originally Posted at https://mises.org/

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