Tuesday, September 4, 2012

Open Letter to David Olive

David Olive is a business columnist at the Toronto Star.

Dear Mr. David Olive,

It seems that you have incorrectly labelled Romney's VP runner Paul Ryan as a libertarian. I think the Republican Party propaganda is working on you, David. Ron Paul has been cast down the Orwellian memory hole while Paul Ryan has taken his spot as the Tea-Party candidate that favours gold. Fortunately, mainstream media no longer holds a monopoly on opinion molding.

The goal of this letter is to point out your misunderstandings. Therefore it's best to get this out of the way: for the most part you and I agree. Any gold standard introduced by the GOP is either going to be a campaign lie and never implemented, or it's going to be remnant of the state-controlled gold standard of yesteryear. However, where you and I disagree is in our worldview and the battle between state power vs. social power. Obviously, you don't see any kind of conflict of interest. I also suspect you believe the GOP is actually trying to implement a libertarian worldview. That's what makes your article so hard to critique. I agree with you - the GOP is a stupid, evil moronic thing. But I strongly disagree with your worldview, and your incorrect assumption that the GOP is the essence of libertarianism.

The latest idiocy to emerge from this swamp is a fervid desire to return to the gold standard, in which all currency is backed by gold reserves. This is a straight-up gambit by the GOP to destroy Washington’s ability to exert what control it can over the economy, and severely constrain government’s ability to promote economic growth.

No, this is the GOP's latest gambit to appeal to the growing number of libertarian Americans. And it ain't gonna work. Regardless, constraining the state's ability to to intervene in the economy and "promote economic growth" is an excellent thing. For starters, "economic growth" is just doublespeak for "increase the deficit" or "print more money." If the state could promote economic growth then the USSR would still be around. Tell me David, how can the state grow the economy without rational calculation? I have yet to see any economist successfully answer Mises' challenge.

The GOP, in its deliberations this week in Tampa, made no secret of its determination to dismantle the modern, successful welfare state [emphasis mine]

What planet are you living on, David?

Ryan himself is too smart to speak of a revived gold standard, which suffers a lingering “barbaric” reputation among economists. In a recent poll cited by University of Chicago professor Richard Thayler, noted in the latest Atlantic, not one economist endorses a return to the gold standard.

Eventually it's going to be hard to ignore the Austrian school. And the more the media tries to, the more credibility alternative media will get. David, this is a personal appeal to you. Read about the Austrian school. I'm not saying you have to agree with it, nor is becoming a libertarian a prerequisite. But if you continue to ignore Austrian insights, it shouldn't come as a surprise when you're viewed as less of a critical thinker and more of a mouthpiece for the political-corporate establishment.

Ryan’s currency would be backed by a “basket” of goods. Presumably these would include gold but also oil, soybeans, pork bellies, sugar, and Slushie futures.

The real gold standard is a market chosen money. Ron Paul, the real libertarian, is merely advocating a competition in currency. If Fed dollars really are superior to gold, silver - or even Slushies - then Bernanke has nothing to worry about.

Ryan... doesn’t grasp (or care) that a greenback tied to commodities would be hugely volatile. That’s precisely opposite the assurance of price stability claimed by the gold-standard advocates. As every motorist knows, pump prices change by the hour and for no apparent reason. And in the 12 years ending 2011, the gold price has soared 618 per cent.

And this isn't volatile? And as far I know - no credible economist is crediting a gold standard with price stability. Price stability is a fallacious objective, a fetish by central bankers that has no bearing on economic realities whatsoever. And as any critical thinker knows, it's not necessarily the price of gold that has soared - it's the value of the dollar that has dropped.

Which means a “new” Fed ....

And this where you and I agree. Paul Ryan's plan would involve a new Fed, or at least a Fed with a different mandate. The real libertarian, Ron Paul, advocates (obviously) an end to the Fed. This is the real libertarian position. You cannot call someone a libertarian if they support a central bank. It's an affront to the philosophy of peace and freedom.

So much the better, say the gold-standard proponents. Government should get out of the money business. That task can be turned over to speculators in the Chicago pits. And promoting economic growth and job creation can be outsourced to a Corporate America last heard from in vapourizing $8 trillion in homeowner equity. In emergencies, the “new” Fed would have to buy stronger foreign currencies to meet America’s financial obligations. That of course would inflate rather than reduce the national debt.

I don't really know where to start here. I must have lost your line of reasoning or you've made some wild accusations. First off, the Fed is part of the government. Yes, I know it's a "private bank" but it's as fascist as Mussolini. Getting government out of the money business means getting government completely out of the money business. That means the task wouldn't be transferred over to speculators (isn't that where it kind of is now?) That means Corporate America couldn't destroy the economy with its debt instruments (financed by the Fed). A truly private money market means that a number of currencies, not just gold, could be accepted and exchanged on a voluntary basis. As opposed to the coercion of the current system, or the coercion of Paul Ryan's plan.

And as a side note, let's clear this up right now: The Fed is inflating. Not reducing the national debt. Under Ryan's plan, the Fed would continue to inflate. The only way to take away the power of the Fed's ability to inflate is to open the institution up to some competition.

“The libertarian monetary proposals are a prescription for disaster on a scale we can’t even imagine,” Christopher Mahoney, former vice-chairman of Moody’s Investor Services

Moody's didn't see the crash of '08 coming. Austro-libertarians did. Continuing with the current monetary policy will lead to disaster on a scale we can't even imagine. Trust me on this David. I wouldn't lie to you.

The object of these mountebanks is to disembowel the federal government, by gutting a Fed that would no longer be able to adequately finance government. And gutting the Fed would be achieved by the expedient of bringing back the gold standard.

Exactly, that's the point.. although not through the Paul Ryan plan.

A return to the gold standard is wildly impractical. Requiring the Fed to hold gold in equal amount to currency outstanding would force it to...

You're missing the big picture here, David. There is no need for the Fed. A return to gold is a return to a money determined by the market. Without it, we're living in a pseudo-market, hence all the "market failures" attributed to capitalism. A free-market money alongside a government (or private defence agencies) that protect private property - that's the libertarian ideal. Not some pseudo-gold standard where the Fed still exists and Paul Ryan is VP.

The gold standard was in place during the massive run-up in U.S. government spending in the New Deal, the Second World War, and the 1960s creation of Medicare and other entitlement programs that Republicans incorrectly insist are unaffordable.

That's not that gold standard advocated by Austro-libertarians. It's forgivable, but I hope you see the difference now.

The gold standard was also in place during the frequent bank runs and financial markets “panics” of the late 19th- and early 20th centuries.

I think someone should read Rothbard.

An emasculated Fed could not have curtailed the latest global financial crisis.

An emasculated Fed could not have fuelled the latest global financial crisis (and the next one).

In response to the Wall Street collapse of 2008-09, the Fed would not have been able to scare up the huge quantities of the yellow metal required to back its multitrillion-dollar injection of liquidity into the U.S. economy

Well duh. That's kind of the point

...to prevent a Great Recession from becoming a second Great Depression. And the U.S. jobless rate today would be in the 30 per cent range instead of its current 8.3 per cent.

Bob Murphy has an excellent lecture about this. Can you please take one hour out of your time to watch it? Like I said, you don't have to agree with it. I'm sure you won't. But please check out both sides of the story.

..the Fed’s indispensable role and to government efforts at cushioning the blow to Main Street from the latest failure of capitalism.

By bailing out the banks that caused this mess? Maybe I took this out of context, but I don't think I did. Jesus, David. You can't be serious.

Republicans in Tampa this week invoked cherished values of freedom, patriotism and self-reliance. But what they stand for is anarchism. The sooner the GOP grasps this, and reinvents itself for the 21st century, the sooner America can get on with claiming a second century as its own.

I like this ending. Here's my critique of it: David, the GOP does not stand for those things. It's just rhetoric. However, the sooner the GOP grasps that they did a very idiotic thing by throwing out Ron Paul for Romney/Ryan, the better it can reinvent itself for the 21st century. Admittedly, I was shocked when I first realized that all this Austrian economics and libertarian stuff basically amounted to anarchy. As a former socialist that loved the State, it was hard thing to come around to. But eventually I did. Reason trumped emotion.

Anarcho-capitalism, the free society, radical liberalism, the Austro-libertarian worldview -- whatever you want to call it, this philosophy is morally and economically superior to state coercion. Obviously we can't go to anarchy tomorrow. Too many people are dependent on government. But a society that operates on voluntary principles, that rejects the violence inherent in state power - that's the kind of society I want to build toward. The GOP is not advocating this type of world. But Ron Paul is and that's real libertarianism. Not this phony gold-standard Paul Ryan bullshit.

Thank you for reading,


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