Category Archives: Free Trade

The Institute for Justice Challenges Unjust Law Banning Compensation for Bone Marrow

In January 2008 I wrote a post calling for the repeal of the National Organ Transplant Act of 1984. As I mentioned in the post, many thousands of lives are being sacrificed because of the moral hang-ups of certain individuals who think its icky to sell organs to people who need them. How dare they.

As if this wasn’t bad enough, bone marrow is included as part of the ban. The act of paying an individual for his or her bone marrow is a felony which is punishable for up to five years in prison for everyone involved in the illegal transaction.

The Institute for Justice has decided to challenge this most absurd provision of this absurd bill. Below is a video from the organization explaining their lawsuit against U.S. Attorney General’s Office:

For the sake of the Flynn family, here’s hoping that the Institute for Justice wins the day.

Hat Tip: The Agitator

Obama Repeals NAFTA

Okay, that’s probably a bit of an overstatement… But I don’t think that starting a trade war with the Americans who say “eh” and “aboot” Canadians is a really good idea. Via co-blogger Jason Pye at his personal blog:

Canada’s six NHL teams are scrambling to find alternative travel arrangements south of the border after the U.S. Department of Transportation banned Air Canada’s charter fleet from flying between U.S. cities.

In a furious exchange with the Obama administration over the mid-August ruling, Canada has launched its own investigation and will soon close its skies to U.S. sports team charters in retaliation, warns Transport Minister John Baird.

The sticking point is an eight-year-old exemption that had allowed sports and celebrity charters to make several pit stops in American cities. Under existing open skies agreements, regular Canadian airline flights can only visit one U.S. city before returning.

The ruling also side-swipes musicians and other artists on tour.

The matter was pushed by the U.S. Air Line Pilots Association. It had demanded an investigation of passenger lists on the NHL flights, which found a few examples of injured players, personal trainers and team owners boarding the charter south of the border and departing at another U.S. city in a technical violation of the agreement.

Emphasis added to point out — as Jason does — that this is more about appeasing a union than anything else. This isn’t about safety. This isn’t about the NHL or Canada. This is about protecting an American union from competition. And if economic inefficiency is the result, so be it. If trade retaliation is the result, so be it. Campaigns don’t finance themselves, people! Ya gotta take care of your friends.

Obama Makes Highways More Dangerous

Barack Obama’s recent dictatorial decision to once again break his campaign promise on raising taxes byraising tariffs on Chinese made tires in order to payback political allies in organized labor is already having some consequences.

First of all, Obama has probably ignited a new trade tensions that may cause a trade war between the US and China. The last time a global trade war broke, well….the Great Depression was a result. The Asian and US stock markets were down this morning on the news.

More importantly, it seems that Barack Obama may be putting American lives at risk on the highway. Consumer Reports’ official blog had a writeup that was interesting to say the least.

The Obama administration on Friday imposed a new 35-percent tax on tires made in China. That includes many of the S- and T-rated tires in our recent upcoming tire test of all-season passenger car tires. More than half of the top 10-rated tires in the November issue are imported from China.

The tariff is likely to increase prices on tires for consumers at least in the short term, as China is by far the largest tire producer in the world. Also, some tire models could be harder to find temporarily if manufacturers decide to switch production to another low cost country.

China’s crime apparently was that it built low cost tires which are better in quality than tires made by Obama-supporting union thugs. The United Steelworkers Mafia couldn’t have that so they decide to try and eliminate the competition.

Average Americans may pay for this blatant act of political pandering…with their lives in some cases.

Because the tire industry is very competitive, tiremakers may not be able to pass the price whole price increase along to consumers for long. But we at Consumer Reports are concerned that the higher tariff may indirectly compromise safety by giving consumers incentive to delay replacing worn tires. The move is likely to put some pressure on consumers, but more on tire manufacturers.

In addition to the lost jobs at our ports and among our importers when China retaliates and/or as a direct result of this tax increase, in addition to higher tire prices, in addition to the economic and diplomatic damage this has caused, in addition to the clear example of old style political payback behind closed doors and without public input, this tax increase may prove fatal for some Americans who will have accidents that will be caused by worn tires that they could not replace because they cannot afford them.

“Hope and change” indeed.

I’m one of the original co-founders of The Liberty Papers all the way back in 2005. Since then, I wound up doing this blogging thing professionally. Now I’m running the site now. You can find my other work at IJ Review.com and Rare. You can also find me over at the R Street Institute.

Obama Raises Taxes Without Vote of Congress

“I can make a firm pledge….no family making less than $250,000 will see any form of tax increase…..not any of your taxes”-Barack Obama, September 12, 2008

Once again, President Obama has lied to the country. After raising cigarette taxes earlier this year, Obama just ordered another tax increase. This time, he raised every American’s taxes without a vote of Congress and with the simple stroke of a pen. Obama increased taxes on Chinese-made tires.

In one of his first major decisions on trade policy, President Obama opted Friday to impose a tariff on tires from China, a move that fulfills his campaign promise to “crack down” on imports that unfairly undermine American workers but risks angering the nation’s second-largest trading partner.

The decision is intended to bolster the ailing U.S. tire industry, in which more than 5,000 jobs have been lost over the past five years as the volume of Chinese tires in the market has tripled.

It comes at a sensitive time, however. Leaders from the world’s largest economies are preparing to gather in Pittsburgh in less than two weeks to discuss more cooperation amid tensions over trade.

The tire tariff will amount to 35 percent the first year, 30 percent the second and 25 percent the third.

Which means American consumers will see an increase in prices of at least 35% for their tires in the name of saving 5,000 jobs. Chinese and US companies with factories overseas are not going to pay the tariffs, they’ll pass them on to consumers. There is also the latest example of the Obama administration diplomatic ineptness of angering trade partners before major trade talks with China among other countries. Also, there was not much public debate over this, since this decision was reached behind closed doors with the help of an obscure Federal trade panel with no citizen input.

Of course with the Obama administration, there’s always someone or some group to be paid back.

Although a federal trade panel had recommended higher levies — of 55, 45 and 35 percent, respectively — the decision is considered a victory for the United Steelworkers union, which filed the trade complaint.

The United Steelworkers union endorsed Obama’s presidential bid and the Steelworkers had a massive grassroots effort that claimed credit for helping win Pennsylvania, Ohio, and Virginia; among other states.

“Hope and Change” indeed.

I’m one of the original co-founders of The Liberty Papers all the way back in 2005. Since then, I wound up doing this blogging thing professionally. Now I’m running the site now. You can find my other work at IJ Review.com and Rare. You can also find me over at the R Street Institute.

An Aristocracy of Talent, and the Triumph of Markets

This is possibly the single best business document I have ever read; and I mean that with no hyperbole. It is also the single most libertarian document I have ever seen applied to a large corporate environment.

You HAVE TO read this.

I am a cynically romantic optimistic pessimist. I am neither liberal, nor conservative. I am a (somewhat disgruntled) muscular minarchist… something like a constructive anarchist.

Basically what that means, is that I believe, all things being equal, responsible adults should be able to do whatever the hell they want to do, so long as nobody’s getting hurt, who isn’t paying extra

I’ll Support Your Boycott If You Support Mine

Yet another great letter by Don Boudreaux:

Dear Olivia Jane:

You and many readers of Daily Kos are furious that Whole Foods CEO John Mackey expressed – in the pages of the Wall Street Journal – his opposition to greater government involvement in health care.

Exercising your rights and abilities as consumers, you are therefore boycotting Whole Foods.  You’re using your freedom to avoid paying for products offered by someone whose attitude toward government you disapprove of.
Isn’t freedom wonderful?!

But I must ask: do you endorse my freedom to boycott paying for products offered by those whose attitude toward government I disapprove of?  Like you, I have very strong opinions about the proper role of government, and also as in your case, a famous chief executive is now endorsing government policies that I find reprehensible.

Will you champion my freedom to stop supporting, with my money, President Barack Obama’s services?  Will you come to my defense if I stop paying taxes to support those policies of Mr. Obama with which I disagree – policies such as the economic ’stimulus,’ more vigorous antitrust regulation, and cap and trade?  Indeed, will you defend me if I boycott – if I choose not to pay taxes to support – Obamacare?

If you will support me in my boycott, then I applaud your principle and, although I disagree with you about Mr. Mackey’s political views, fully support your freedom to boycott Whole Foods.  But if you will not support me in my boycott, then can you tell me on what principle you would stand to defend your right to boycott supermarkets if someone (say, Mr. Mackey) managed to secure legislation that obliges you to shop at Whole Foods?

I await your reply.

Donald J. Boudreaux

I couldn’t put it better myself. One quibble, even if Olivia Jane was not willing to extend us the same courtesy and support our desire to boycott Obamacare, we should applaud her principle. Just because she has reprehensible political views does not mean we should ignore the opportunity to teach her the value of a right to exit/disassociate.

I am an anarcho-capitalist living just west of Boston Massachussetts. I am married, have two children, and am trying to start my own computer consulting company.

Our Exalted Fearless Leader Almost Gets It

Obama is not a dumb man. He understands that government provisioning generally produces a worse service than private organizations which are dependent on people choosing to patronize them.

Here he is pointing out that while Fedex is required by law to charge higher prices than the Post Office for equivalent services, it is the Post Office which struggles and requires constant taxpayer bailout.

Like Amtrak, USPS, Fannie Mae and Freddie Mac, any publicly funded insurance company will struggle to contain costs as it encourages overconsumption.

I’ve long argued that the real reason that medical care is so expensive is that the government limits supply and subsidizes demand.

The Obama administration, in choosing to ignore the limits on supply placed by government, is embarking on a program that is doomed to fail to meet any of the publicly stated goals.

It’s too bad that Mr Obama is unwilling to follow the evidence to its inevitable, logical conclusion.

I am an anarcho-capitalist living just west of Boston Massachussetts. I am married, have two children, and am trying to start my own computer consulting company.

Ain’t Nobody’s Business If You Do

THIS BOOK IS BASED on a single idea: You should be allowed to do whatever you want with your own person and property, as long as you don’t physically harm the person or property of a nonconsenting other.

Thus begins a book that everyone interested in politics should read; Ain’t Nobody’s Business If You Do: The Absurdity of Consensual Crimes in a Free Country by Peter McWilliams.  Published in 1998, it is a damning survey of how the United States had become a state composed of “clergymen with billy-clubs”.  It analyzes the consequences of punishing so-called victimless crimes from numerous viewpoints, demonstrating that regardless of what you think is the most important organizing principle or purpose of society the investigation, prosecution and punishment of these non-crimes is harmful to society.

This remarkable book is now posted online, and if one can bear to wade through the awful website design, one will find lots of thought-provoking worthwhile commentary, analysis, theory and history.

His final chapter, on how to change the system, while consisting mainly of pie-in-the-sky, ineffective suggestions of working within the system, starts of with an extremely good bit of advice that I urge all our readers to try:

The single most effective form of change is one-on-one interaction with the people you come into contact with day-by-day. The next time someone condemns a consensual activity in your presence, you can ask the simple question, “Well, isn’t that their own business?” Asking this, of course, may be like hitting a beehive with a baseball bat, and it may seem—after the commotion (and emotion) has died down—that attitudes have not changed. If, however, a beehive is hit often enough, the bees move somewhere else. Of course, you don’t have to hit the same hive every time. If all the people who agree that the laws against consensual crimes should be repealed post haste would go around whacking (or at least firmly tapping) every beehive that presented itself, the bees would buzz less often.

I highly recommend this book.  Even though I have some pretty fundamental disagreements with some of his proposals, I think that this book is a fine addition to the bookshelf of any advocate of freedom and civilization.

Hat Tip: J.D. Tuccille of Disloyal Opposition.

I am an anarcho-capitalist living just west of Boston Massachussetts. I am married, have two children, and am trying to start my own computer consulting company.

Make-Work Projects Don’t Create Prosperity

The purpose of society is to help people satisfy their needs. A major means used to satisfy needs are economic activities such as production, trade, and the performance of services.

In a complex economy, it is easy to lose sight of this, and people begin to believe the fallacy that the purpose of an economy is to provide employment to people. And we get absurdities like the make-work projects of Roosevelt’s NRA.   French lawmaker and economist Frederic Bastiat eloquently explained the futility of this practice in the 19th century:

But Mr. Lamartine has advanced one argument which I cannot pass by in silence, for it is closely connected with this economic study. “The economical question, as regards theatres, is comprised in one word—labor. It matters little what is the nature of this labor; it is as fertile, as productive a labor as any other kind of labor in the nation. The theatres in France, you know, feed and salary no less than 80,000 workmen of different kinds; painters, masons, decorators, costumers, architects, etc., which constitute the very life and movement of several parts of this capital, and on this account they ought to have your sympathies.” Your sympathies! Say rather your money.

And further on he says: “The pleasures of Paris are the labor and the consumption of the provinces, and the luxuries of the rich are the wages and bread of 200,000 workmen of every description, who live by the manifold industry of the theatres on the surfeit of the republic, and who receive from these noble pleasures, which render France illustrious, the sustenance of their lives and the necessities of their families and children. It is to them that you will give 60,000 francs.”

Yes, it is to the workmen of the theatres that a part, at least, of these 60,000 francs will go; a few bribes, perhaps, may be abstracted on the way. Perhaps, if we were to look a little more closely into the matter, we might find that the cake had gone another way, and that those workmen were fortunate who had come in for a few crumbs. But I will allow, for the sake of argument, that the entire sum does go to the painters, decorators, etc.

This is that which is seen. But whence does it come? This is the other side of the question, and quite as important as the former. Where do these 60,000 francs spring from? and where would they go, if a vote of the legislature did not direct them first toward the Rue Rivoli and thence toward the Rue Grenelle? This is what is not seen. Certainly, nobody will think of maintaining that the legislative vote has caused this sum to be hatched in a ballot urn; that it is a pure addition made to the national wealth; that but for this miraculous vote these 60,000 francs would have been forever invisible and impalpable. It must be admitted that all that the majority can do is to decide that they shall be taken from one place to be sent to another; and if they take one direction, it is only because they have been diverted from another.

This being the case, it is clear that the taxpayer, who has contributed one franc, will no longer have this franc at his own disposal. It is clear that he will be deprived of some gratification to the amount of one franc; and that the workman, whoever he may be, who would have received it from him, will be deprived of a benefit to that amount. Let us not, therefore, be led by a childish illusion into believing that the vote of the 60,000 francs may add anything whatever to the well-being of the country, and to national labor. It displaces enjoyments, it transposes wages—that is all.

This fallacy is again being advanced by proponents of continued construction of the F-22 fighter, an aircraft that is so expensive and unreliable that it has never been risked in a combat sortie, and aircraft that was designed to combat a Soviet air force that disintegrated long before the aircraft got off the drawing board. Barack Obama wants to stop purhcasing these aricraft in order to redirect the revenues in a different direction.   Numerous lawmakers in whose districts components of the aircraft are built are trying to preserve cosntruction arguing that large numbers of people are employed making the aircraft.

Of course, the proponents are missing a major point: the people building the aircraft are wasting their time making something for which there is little consumer demand.  As a result,  the materials, the man hours, the factories all are diverted from making something for which there is greater consumer demand.  These people could be making better DVD players, or cheaper TV’s, or flying cars or better MRI’s.  Instead they produce an aircraft which is ineffective at its primary purpose, blowing things up.

If the proponents of continuing F-22 manufacture really want to improve the lot of the workers who make the aircraft, they should be allowing this uneconomical weapons system to be abandoned and allow the workers to look for work making things that people actually want.  Via the price system and the evolution of the free market, all of the resources idled by such a move would be rapidly repurposed to more profitable forms of production, and the workers would find sustainable jobs rather than depending on good will from lawmakers to keep their jobs going.

I am an anarcho-capitalist living just west of Boston Massachussetts. I am married, have two children, and am trying to start my own computer consulting company.

If You Kill Your Cattle, You Will Starve

Over at the Master Resource Blog,  law professor Gail Heriot points out the similarities between global warming, fear-monger Al Gore and Xhosa Prophetess Nongqawuse:

Nongqawuse was a teenager and a member of the Xhosa tribe in South Africa.  One day in April or May of 1856, she went down to the river to fetch water.  When she returned, she said that she had encountered the spirits of three of her ancestors who told her that her people must destroy their crops and kill their cattle.  In return, the sun would rise red on February 18, 1857, and the Xhosa ancestors would sweep the British settlers from the land and bring them fresh, healthier cattle.  (Some of the Xhosa cattle had been suffering from a lung ailment, which may or may not have been brought by the British settlers’ cattle.)

Astonishingly, the Xhosa chieftain, Sarhili, agreed to do exactly as this young girl urged.  Over the next year, a frenzy occurred in which it is estimated that between 300,000 and 400,000 cattle were killed and crops destroyed.  Historians sometimes call it the “Great Cattle Killing.”

But on February 18, 1857, the sun rose as usual.  It was not red.  And the Xhosa ancestors did not show.  But the Xhosa people had destroyed their livelihood.  In the resulting famine, the population of the area dropped from 105,000 to less than 27,000.  Cannibalism was reported.  Following Nongqawuse’s advice was a calamity of staggering proportions for the Xhosa people.

Like Nongqawuse, Gore tells us that the sun will soon rise red over the land.  Well, maybe.  But already the models that he relies on have been proven wrong.  The intense period of warming that these models predicted over the past ten years never came to pass.  Yet we are repeatedly told that it’s still coming and that it’s just a little late.  Apparently, we should pay no attention to the fact that the polar ice is expanding again.  Instead, we must put the brakes on our use of energy–the very thing that makes the modern world possible–to avoid antagonizing the spirits of our ancestors, I mean to avoid climate disaster.

The most infuriating aspect of the fear-mongers’ movement is that their solution to climate change is for humanity to adopt an economic system that has brought misery and death nearly every time it has been tried.  From the tropics to the poles,  free markets have brought prosperity, comfort and longevity to the masses.  No matter how well intentioned they are, the fear-mongers threaten to wreck the engine that allows the Earth to support a human population in the billions.

The Earth’s climate is in a state of flux. The notion that humanity should doom itself to privation and famines in a futile attempt to maintain climactic parameters within a set of narrow bands is the height of folly.  If we kill our cattle, we too will starve.

I am an anarcho-capitalist living just west of Boston Massachussetts. I am married, have two children, and am trying to start my own computer consulting company.

It’s Time to Impeach Obama

It’s time to impeach Obama; indict him, and his entire administration, for fraud, coercion, extortion, influence peddling, and grand theft under the color of law, amongst hundreds of other charges.

It is not simply the auto issue; but that is currently the most visible.

This is no hyperbole. I am not simply spouting off. I believe, and will from this point forward, work to see, Barack Obama impeached, charged, indicted, tried, and imprisoned, for the crimes he and his cronies have committed against this nation, and its people.

Also, let me make this clear: This is NOT about politics, or at least not about political ideology. I believe that everyone, left, right, libertarian, or indifferent to ideology; should see what Obama and his administration are doing, and understand the damage it is doing, and will do, to this country.

We cannot allow our nation to become a nation of men. We MUST remain a nation of laws.

At this point, Obama, and his administration, aren’t even bothering to PRETEND to obey the law, or the constitution. They have embarked on a campaign of theft and fraud never seen before in the history of man kind; knowing that they had the full cover of the media protecting them, a friendly congress, and a co-operative judiciary.

They are in clear violation of the constitution, and hundreds if not thousands, of state and federal laws; blatantly and knowingly flouting them in fact, because, in Obamas words, “We won”.

Well, I’m sorry sir, for now at least, we are still a nation of laws; and you must be brought to account.

I am a cynically romantic optimistic pessimist. I am neither liberal, nor conservative. I am a (somewhat disgruntled) muscular minarchist… something like a constructive anarchist.

Basically what that means, is that I believe, all things being equal, responsible adults should be able to do whatever the hell they want to do, so long as nobody’s getting hurt, who isn’t paying extra

Open Thread Question of the Day: To Whom or What Do You Pledge Your Allegiance?

I was listening to the local talk show host on my way to work this morning and the topic was the ongoing saga surrounding the auto makers. This particular talk show host is a very pro-union “buy American” (and therefore anti-free trade) kind of guy in the mold of Lou Dobbs. As I pulled into my parking space, he posed 2 questions 1.) To whom or what do YOU pledge your allegiance and 2.) To whom or what do these multi-national corporations pledge their allegiance?

My response was an immediate “to myself and to my family, but certainly not the federal government of the US!” (for many of the same reasons that tarran so eloquently explained). I’m quite certain that this is not a response this talk show host would appreciate. I’m also quite certain that in his view, these corporations are supposed to “provide American jobs” no matter how costly and no matter how much the federal government punishes them with taxes and regulations. To suggest that a business should make its first loyalty to pursuing profits for shareholders would be heretical! These populist propagandists ask such questions of these businesses but fail to ask the question of government “to whom or what does Washington pledge its allegiance?” (Hint: it certainly isn’t to free market principles or liberty).

After thinking about the question a little longer, I concluded that my allegiances are as follows: myself*, my family, and the defense of the principles of life, liberty, property and justice for all**.

Now I pose this question to you, the reader: To whom or what do you pledge your allegiance?

» Read more

Quote Of The Day

This one is a bit topical for me. My wife and I just had our taxes prepared by her business accountant. As mentioned last year, she and her sister started a business, and due to the myriad obstacles and pitfalls inherent in our legal system, incorporated the business as an S Corp. Being a first-year business, startup costs far outweighed revenue, so with losses there was, of course, no income to tax. However, they just received a bill for $800 in estimated tax payment, due Apr 15, to remain an S Corp for the next year. Read the below, and while it’s not quite the politics of pull, is it any doubt that this is nothing more than a permission to do business from those who do no business?

From Atlas Shrugged, a portion of the Francisco D’Antonia money speech:

Do you wish to know whether that day is coming? Watch money. Money is the barometer of a society’s virtue. When you see that trading is done, not by consent, but by compulsion–when you see that in order to produce, you need to obtain permission from men who produce nothing–when you see that money is flowing to those who deal, not in goods, but in favors–when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you–when you see corruption being rewarded and honesty becoming a self-sacrifice–you may know that your society is doomed.

My personal issues aside, a look at the news shows this writ large. The loot required to remain operating may differ depending on whether your name is JP Morgan or Lehman Brothers. Whether you have laws rewritten to be allowed to keep large bonuses may depend on how much you’ve contributed to Chris Dodd, while executives in a customer-facing industry are harangued for use of private jets, demanded to work for $1 salary, and finally fired by the President. And we watch the executive/appointee revolving door between Goldman Sachs and Washington DC.

This isn’t capitalism and this isn’t freedom: this is corporatism. And we watch as the snake oil salesmen offer us more of the same, with a healthy dose of welfare statism thrown in for good measure. It’s a road we’ve been headed down for decades, and we’re finally nearing that destination: serfdom.

Sometimes I wonder what it would be like to live in America, rather than the country who now shares only its name.

Obama Encourages Corporate Malfeasance

The trainwreck that is the Obama administration continues with his support for caps on executive pay. This bad idea has been tried before, and had the disastrous result of enhancing the power corporations wield over their employees, particularly with upper and middle management. It contributed to many of the instances of corporate malfeasance.

The problem is that the Obama administration is attempting to cap executive compensations at below market rates. Whenever the government does this, people come up with alternate forms of compensation to offer in lieu of the salaries or bonuses that are now illegal. A company may, instead of paying its management a high salary, offer them a lower one and buy them a house. It will buy them health club memberships, or give them no-cost vacations at company-owned resorts. The end result? People who don’t own their homes, but are dependent on their employers for their housing, their memberships, or even their kids’ schooling.

Many corporate scandals progress until someone is brave enough to blow the whistle. When blowing the whistle merely only the loss of a paycheck, people are still reluctant to do it.  A loss of a paycheck and the loss of one’s home, one’s social circle, access to the kids’ schools etc, and the incentive to turn a blind eye to criminal behavior, or even to participate in it is heightened.

One would think that one of the major lessons of the current meltdown would be do decentralize economic power by reducing the competitive advantage handed by the regulatory environment to large, hide-bound companies. Instead, the Obama administration is attempting to tilt the playing field further in their favor. Assuming that he is sincere in attempting to curb malfeasance and dereliction of duty amongs corporate officers, this bill is definitely an own goal.

I thought it would be many decades before we saw an administration as incompetent as that of George Bush. I was wrong; it took no time at all to get one that was even more incompetent.

I am an anarcho-capitalist living just west of Boston Massachussetts. I am married, have two children, and am trying to start my own computer consulting company.

Obama’s Policy to Fight Mexican Drug Cartels is Doomed to Fail

The Obama administration, rather than dealing with the root cause of the violence along the Mexican border, has decided to adopt a policy to deal with the symptoms. The problem is that this policy will neither alleviate the symptoms nor come close to treating the problem.

WASHINGTON – The Obama administration promised Tuesday to help Mexico fight its drug war by cutting off the cartels’ supply of guns and profits, while resisting the Texas governor’s call for a troop surge at the border to ward off spillover violence.

Let’s assume for a moment that Obama’s policy to prevent Mexico bound firearms from leaving the U.S. 100% successful. Given the fact that the drug cartels can acquire firearms from other sources (such as corrupt Mexican government agents with access to firearms among other sources) the only difference would be that the firearms are no longer coming from the U.S.

The Obama administration correctly identifies that the drug cartels are so powerful because of the profitability of the illicit drug trade. It’s this ability to make enormous profits, particularly in an impoverished country as Mexico, that attracts players into the business and makes corruption on the part of government officials almost irresistible. Unfortunately, though the Obama administration has identified the profitability of the drug trade as the source of the drug cartels’ power, there is clearly a profound misunderstanding of the way basic economics work (as if the bailouts, handouts, and myriad of other government programs were not proof enough).

The steps announced by Homeland Security Secretary Janet Napolitano – 450 federal agents shifted to border duty, supplied with dogs trained to detect both drugs and cash, and scanners to check vehicles and railcars heading into Mexico – amount to a subtle but important shift:

The blockade of contraband will now be a two-way effort. The fence begun under the Bush administration will be completed, to deter smugglers of drugs and workers. But the new emphasis will be on disrupting the southbound flow of profits and weapons that fuel the cartels.

At his televised news conference Tuesday, President Barack Obama said that for now, it’s more important to disrupt the cartels’ access to profits and weapons than to fortify the border with soldiers.

“That’s what makes them so dangerous,” he said. “The steps that we’ve taken are designed to make sure that the border communities in the United States are protected and you’re not seeing a spillover of violence. … If the steps that we’ve taken do not get the job done, then we will do more.”

So what’s wrong with this approach? The basic economic law of supply and demand tells us that whenever a product is in high demand (drugs in this case) and the supply is lower (in this case by successful drug interdiction by the U.S. governemnt), those who supply the given demand stand to profit more NOT LESS! Whether Obama’s policy results in a decrease in the supply of drugs of 1% or 99%, those drugs which do make it to the end customer will pay even more to get them.

I would even go as far as to say that the Mexican drug cartels would cheer this policy. Sure, the cartels might have more difficulty moving their product into the U.S. and their profit and firearms out of the U.S. but for the most clever smugglers, these enhanced drug interdiction efforts would filter out the competition! (And we know how black market operators hate competition).

On some level, I do believe that even the political class understand this but somewhere, there is a disconnect. Just yesterday in her visit to Mexico, Secretary of State Hillary Clinton admitted that the war on (some) drugs over the past 30+ years “has not worked.”

“Our insatiable demand for illegal drugs fuels the drug trade.”

And now the disconnect:

“Our inability to prevent weapons from being illegally smuggled across the border to arm these criminals causes the deaths of police officers, soldiers and civilians…”

Mrs. Clinton apparently recognizes how the war on (some) drugs has been an abject failure fails to realize that the Chosen One’s policies will do little to reverse this trend. If she truly wants to do something productive, something has to be done about what she (correctly) describes as this “insatiable demand” for these drugs. She seems to understand that the “Just say No” campaign didn’t work but does she and others within the Obama administration really believe that more drug hysteria PSA’s will do anything to curb this demand?

Given how the Obama administration has decided to deal with the drug war related violence along the border, I’m not optimistic. If spending billions of dollars annually on this insane war on (some) drugs which has contributed to leading the world in the number of people in prison (imprisoning 1 out of every 100 adults; more than half of the U.S. prison population is there because of drug related offenses) has failed to curb the demand, then perhaps it’s time to try a different approach.

Nothing short of legalizing the drug trade will stop the violence, so why does the politicos, law enforcement, and government bureaucrats at almost every level continue the same “get tough” policy which clearly has not worked? The only conclusion I can come to: they must be high.

You, Sir, Are the Devalued Prime Minister of a Devalued Government

Would that we had an articulate defender of freedom in Congress as Daniel Hannan, Minister of the European Parliament for South East England.

Here is a video of him confronting the Prime Minister of England.

The truth, Prime Minister, is that you have run out of our money. The country as a whole is now in negative equity. Every British child is born owing around &#163 20,000. Servicing the interest on that debt is oing to cost more than educating the child.
Now once again today you tried to spread the blame around; you spoke about an international recession, an international crisis. Well, it is true that we are all sailing together into the squalls, but not every vessel in the convoy is in the same dilapitated condition. Other ships used the good years to caulk their hulls and to clear their rigging – in other words to pay off debt. But you used the good years to raise borrowing yet further. As a consequence, under your captaincy, our hull is pressed deep into the waterline under the accumulated weight of your debt.

Now it’s not that you’re not apologizing. Like everyone else here, I’ve long accepted that you are pathologically incapable of accepting responsibility for these things. It’s that you are carrying on willfully worsening our situation wantonly spending what little we have left.

Prime Minister, you cannot carry on forever squeezing the productive bit of the economy in order to fund the unprecedented engorgement of the unproductive bit. You cannot spend your way out of recession or borrow your way out of debt.

Watch the whole thing. Much of it applies to all the Democrat and Republican politicians in government today.

Hat tip, Lew Rockwell

I am an anarcho-capitalist living just west of Boston Massachussetts. I am married, have two children, and am trying to start my own computer consulting company.

Is Dollar Hegemony About To End?

Just over two years ago, I offered a worst-case prediction of where this economic crisis could lead.

Wait, though, it gets worse. America isn’t an empire in the conventional sense of the word, but we are an economic empire. The dollar is the currency of the world, from middle eastern oil to the reserve currencies of countless nations. During the Great Depression, or during the stagflation of the 1970’s, other nations were stuck with the dollar, because nothing else was suitable. But if the dollar starts dropping in a major inflation, they now have options. And if they drop the dollar, it’s all over. All of a sudden, America won’t draw on the world for our own stability. Considering the actions of our politicians, that’s a bad, bad thing.

We may be witnessing the end of America as the world’s superpower. It may be the end of our status as the economic empire of the world. Some across the globe, of course, will cheer. After all, they feel like America is the premier force of evil in the world. For all the bad that we’ve done, though, we’ve been a pretty stable force, and worked to prevent the spread of fascism and communism, across the globe. America’s economic system has been the safe-haven for the world. When a position of power is vacated, what typically fills it is rarely positive. The end of the American empire will likely result in more instability worldwide.

There are two reasons that I’m very, very concerned about this.

First, American dollar hegemony has actually been, for all the stupidity we’ve encountered upon over the last few decades, a pretty stabilizing force. To bastardize an old quote, America’s economic system is the worst, except for all the others. There’s no reasonable guarantee that anything that follows dollar hegemony will actually increase stability. Rather I think it will be worse.

Second, I don’t want to pay for our government. While we’ve been pretty well looting the other nations of the world, printing money and sending it to them in exchange for durable goods, only to have them lend it back to our own government to pay for programs we’re unwilling to tax ourselves for. Essentially we’ve been taxing other nations to pay for our own government, with the unspoken understanding that we’d probably slowly print our way out of debt rather than actually pay our debt. I can understand why they don’t want to continue that, especially since we’re dramatically increasing the size of the government that we’ll be expecting them to pay for.

But that doesn’t mean it won’t happen.

Russia, as reported by QandO, made noises last week about putting an end to the dollar as the reserve currency of the world:

The Kremlin published its priorities Monday for an upcoming meeting of the G20, calling for the creation of a supranational reserve currency to be issued by international institutions as part of a reform of the global financial system.

The International Monetary Fund should investigate the possible creation of a new reserve currency, widening the list of reserve currencies or using its already existing Special Drawing Rights, or SDRs, as a “superreserve currency accepted by the whole of the international community,” the Kremlin said in a statement issued on its web site.

The SDR is an international reserve asset, created by the IMF in 1969 to supplement the existing official reserves of member countries.

Now, QandO again (along with Doug @ BTB) reports that one of our far bigger creditors, China, is making the same suggestion:

China’s central bank on Monday proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund.

In an essay posted on the People’s Bank of China’s website, Zhou Xiaochuan, the central bank’s governor, said the goal would be to create a reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies”.

Analysts said the proposal was an indication of Beijing’s fears that actions being taken to save the domestic US economy would have a negative impact on China.

“This is a clear sign that China, as the largest holder of US dollar financial assets, is concerned about the potential inflationary risk of the US Federal Reserve printing money,” said Qu Hongbin, chief China economist for HSBC

I’d like to believe that this is merely a warning to the Obama administration that destroying our currency won’t be accepted by the international community. It would be a very clear warning that if we proceed down this path, those who are currently tied into our dollar will try to quickly cut our losses and leave us out to dry.

But I really don’t think the Obama administration, the Bernanke Fed, and the Geithner Treasury will heed those warnings. You want a reason to fear Great Depression II? This is it.

In fact, it may already be starting. China is worried about the $1 Trillion they’ve already lent us, but the real key to ending dollar hegemony is to stop lending us more. If other countries stop buying US Treasury Bonds, we must find a way to fund our own deficits internally… And there’s some evidence that’s already happening:

Thanks to Brad Setser for the graph

Thanks to Brad Setser for the graph

Yep, foreigners are getting close to their limit. Will it hold? I don’t know, but in the meantime, the Fed is starting the printing press to make up the shortfall (h/t Calculated Risk):

The first outright Treasury coupon purchase will be conducted on Wednesday, March 25, 2009, and will settle Thursday, March 26, 2009. Results will be posted on the New York Fed’s website following the operation.

Starting on Wednesday, April 1, 2009, and continuing every two weeks, the New York Fed will issue a tentative operation schedule for its purchases of longer-dated Treasury securities, including the maturity sector or sectors to be targeted.

The signs are pointing to a major change in world structure.

  • The world is slowing down their purchases of American debt, fearing it won’t be repaid.
  • The world is threatening to liquidate the US Dollar as the de facto reserve currency, because they fear an impending devaluation.
  • The Obama administration, the Fed, and the Treasury appear to be willing to spend historic sums in the face of these developments in the hopes the world is bluffing.

I don’t want to be a doomsayer, but the outlook sure as hell ain’t rosy. America has been gorging at the buffet for the last 40 years, ever since the collapse of Bretton Woods system. The bill is about to come due, and we’re sure to be surprised when we realize it’s pay-per-item, and not all-you-can-eat.

I WILL NOT OBEY

As I have said here before, I am a senior technical executive at a large bank.

As it happens, a bank that was forced at gunpoint, by the secretary of the treasury and chairman of the federal reserve, to accept TARP funds (as all the top surviving banks in the U.S were).

Let me be clear: We did not want TARP funds, or need them; but we, and all the other major banks, were told in no uncertain terms that we WOULD take them.

As obscene as that is, it is irrelevant to what follows; excepting that we did take TARP funds.

The United States House of Representatives recently passed a blatantly unconstitutional bill, placing confiscatory tax burdens on anyone making more than $250,000 and working for an institution that received more than 5 billion of TARP funds.

The bill was in theory specifically addressed at the false outrage over retention bonuses paid to AIG executives; and is targeted only to their bonuses.

In theory.

Of course, this would be an unconstitutional bill of attainder, which wouldn’t pass even the most cursory constitutional challenge; so it was re-written to be broader.

Broader of course means more people would be affected, and congress would be given more power to steal more money.

In fact, if you read into the implications of the bill; it could be used to levy a 90% tax on any income over $250,000, earned by any family making more than $250,000 per year, where either spouse is employed by an institution that received federal “bailout” funds.

It appears that the Senate, and the Obama administration are cold on the bill and that it will not pass, or be signed into law if it did.

I do not earn that much money; nor do my wife and I earn that much together (though in the next few years it is entirely possible that we will).

However, I have something important to say.

If congress should pass any such bill, and the president sign any such law, I WILL NOT OBEY IT.

I will not allow congress to tell me how much I can earn. I will not allow them to take my income because of the actions of others. If they attempt to make me do so by force, I will resist with force.

I will most likely die in the process, which I regret; but at some point a line must be drawn. The constitution must be respected, or it is meaningless.

Congress can make no law that is unconstitutional on it’s face. If such a law be passed, it is the duty of the president to repudiate it; and it must not be signed. If such a law is signed, it is the duty of the agents of the government to refuse to enforce it. If the agents of the state attempt to enforce it, then they must be resisted with force, at all costs.

Anything less is submission to tyranny, and the diminution of citizens, to subjects; or worse.

I have made clear in the past that I would resist police abuse of the constitution. I will resist congresses abuses no less. I will resist the presidents abuses no less.

Agents of the state cannot exceed the legitimate authority of the state. When they do so, they are criminals, and they must be resisted as criminals.

Normally I do not advertise where my lines are; but congress is now in the midst of a tantrum of self indulgence, overconfidence, and hubris not seen since reconstruction.

Nancy Pelosi, Harry Reid, and Barack Obama, are pushing our nation headlong into tyranny and ruin; and decrying those who resist as racists, or reactionaries; simply for not wanting to be serfs.

I would suggest that we petition for the impeachment and prosecution (for conspiracy to deprive every resident of the United States of their civil rights) of any congressman who voted for such a bill; but I know it would do no good.

Government must be made to understand, WE WILL NOT TOLERATE SUCH ABUSE.

We will resist.

We will revolt.

We will not be made subjects, serfs, or slaves.

I am a cynically romantic optimistic pessimist. I am neither liberal, nor conservative. I am a (somewhat disgruntled) muscular minarchist… something like a constructive anarchist.

Basically what that means, is that I believe, all things being equal, responsible adults should be able to do whatever the hell they want to do, so long as nobody’s getting hurt, who isn’t paying extra

Protectionism For Green Industries Is Unnecessary [And Bad]

The Economist Free Exchange Blog, responding to this pro-protectionism piece by Joe Weisenthal, half-heartedly suggests that maybe Joe meant that a little infant industry protection for green industries is in order:

I wonder if he is suggesting some sort of infant industry type policy to stimulate domestic manufacturing of more enviromental products. Interesting idea, but infant industry is tricky. The idea is that with time and protection from the global market (through subisdies and tariffs) the domestic country will gain a comparative advantage in that field. Korea pursued this policy with, arguably, some success in the 1950s. But it did not work so well elsewhere. It involves the government hand picking industries that need to be developed, rather than the market. It often leaves consumers paying more for mediocre goods that might not otherwise exist in the global market.

There are two problems trying to compare anything that America will do regarding infant industry protection for green industries with any other nations who have tried protection:

First, the protectionist nation must be an underdog. America engaged in protectionism at the beginning of the industrial revolution to protect itself from Europe, and eventually rose to a dominant place. Because we are now the most technologically advanced, innovating nation on the planet, we need not protect our own industries from those overseas. They’re the ones playing catch-up, and they’re the ones trying to protect their own infant industries against our established industries. Now, there can be a debate over instituting retaliatory trade impediments to counter those protections other less developed countries are enacting (and I’d come down on the side against doing so personally), but there’s no reason to protect ourselves from them.

Second, protecting infant industries is only necessary when you’re protecting them from established industries. There are no established green industries. This is an infant industry worldwide, and on a worldwide basis, we’re in just as strong of a competitive position as any other country. I understand places like Korea enacting a protectionist, when they’re trying to achieve the same sort of efficiencies on heavy industry of more advanced countries. But here, there’s nobody who has figured it out. Infant industry protectionism arguably may be a good way for industries to catch up with mature foreign industries, but in this case there are no mature foreign industries. There’s no catching up to do when we’re all just out of the gates.

Now, this was separate from Weisenthal’s main point, which is that we should use “green protectionism” as a ruse to introduce some rather traditional forms of protectionism. He sees protectionism as an alternative to welfare, because even if we get higher-priced, less-well-made goods in the US, that keeps those US manufacturing workers employed. I suspect he’d be in favor of banning motor-driven plows, too, so that we can go back to high farming employment? Instead, I suggest that we stop trying to limit competition, and actually stop our own impediments to engaging in competition. If we want to win, perhaps we should get out of our own way instead of trying to trip our competitors.

Ruining Our Economy Is A Domestic Matter — No Foreigners Allowed

From a NYT story about new banking regulations attached to the bailout funds (and the desire for some of these banks to now return the money):

The list of demands keeps getting longer.

Financial institutions that are getting government bailout funds have been told to put off evictions and modify mortgages for distressed homeowners. They must let shareholders vote on executive pay packages. They must slash dividends, cancel employee training and morale-building exercises, and withdraw job offers to foreign citizens.

As public outrage swells over the rapidly growing cost of bailing out financial institutions, the Obama administration and lawmakers are attaching more and more strings to rescue funds.

Now, I understand canceling employee training. After all, you wouldn’t want to teach the people who got us into this mess to change their behavior. When nationalization is complete, they’ll be government employees, so no accountability is necessary! And morale-building is also out — they should be happy following the dictates of Dear Leader, and no morale building should be necessary for our properly conditioned citizens subjects.

But withdrawing job offers to foreign citizens? Do we really need another protectionist dictate coming out of this administration? Don’t we want to extend jobs to the most qualified of anyone who applies, not limit this to only Americans? This sounds like exactly the sort of provision I’d expect from the Bush administration and Republicans, and we’re supposed to believe that this is Change&#153?!

Hat Tip: Economist Free Exchange Blog

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