Monday, December 31, 2007

Happy New Year - The Year in Review

Monday, December 24, 2007

Merry Christmas!

Saturday, December 22, 2007

The War on Religion

As we celebrate another Yuletide season, it’s hard not to notice that Christmas in America simply doesn’t feel the same anymore. Although an overwhelming majority of Americans celebrate Christmas, and those who don’t celebrate it overwhelmingly accept and respect our nation’s Christmas traditions, a certain shared public sentiment slowly has disappeared. The Christmas spirit, marked by a wonderful feeling of goodwill among men, is in danger of being lost in the ongoing war against religion.

Through perverse court decisions and years of cultural indoctrination, the elitist, secular Left has managed to convince many in our nation that religion must be driven from public view. The justification is always that someone, somewhere, might possibly be offended or feel uncomfortable living in the midst of a largely Christian society, so all must yield to the fragile sensibilities of the few. The ultimate goal of the anti-religious elites is to transform America into a completely secular nation, a nation that is legally and culturally biased against Christianity.

This growing bias explains why many of our wonderful Christmas traditions have been lost. Christmas pageants and plays, including Handel’s Messiah, have been banned from schools and community halls. Nativity scenes have been ordered removed from town squares, and even criticized as offensive when placed on private church lawns. Office Christmas parties have become taboo, replaced by colorless seasonal parties to ensure no employees feel threatened by a “hostile environment.” Even wholly non-religious decorations featuring Santa Claus, snowmen, and the like have been called into question as Christmas symbols that might cause discomfort. Earlier this month, firemen near Chicago reluctantly removed Christmas decorations from their firehouse after a complaint by some embittered busybody. Most noticeably, however, the once commonplace refrain of “Merry Christmas” has been replaced by the vague, ubiquitous “Happy Holidays.” But what holiday? Is Christmas some kind of secret, a word that cannot be uttered in public? Why have we allowed the secularists to intimidate us into downplaying our most cherished and meaningful Christian celebration?

The notion of a rigid separation between church and state has no basis in either the text of the Constitution or the writings of our Founding Fathers. On the contrary, our Founders’ political views were strongly informed by their religious beliefs. Certainly the drafters of the Declaration of Independence and the Constitution, both replete with references to God, would be aghast at the federal government’s hostility to religion. The establishment clause of the First Amendment was simply intended to forbid the creation of an official state church like the Church of England, not to drive religion out of public life.

The Founding Fathers envisioned a robustly Christian yet religiously tolerant America, with churches serving as vital institutions that would eclipse the state in importance. Throughout our nation’s history, churches have done what no government can ever do, namely teach morality and civility. Moral and civil individuals are largely governed by their own sense of right and wrong, and hence have little need for external government. This is the real reason the collectivist Left hates religion: Churches as institutions compete with the state for the people’s allegiance, and many devout people put their faith in God before their faith in the state. Knowing this, the secularists wage an ongoing war against religion, chipping away bit by bit at our nation’s Christian heritage. Christmas itself may soon be a casualty of that war.

The War on Religion
by Rep. Ron Paul, MD
December 30, 2003

Saturday, December 15, 2007


Faith and Thought has a great piece on the politics of non-interventionism vs. isolationism. Here's an excerpt:

One of the most common criticisms I hear about Ron Paul is that he is an “isolationist.” Of course, labels can mean just about anything. Paul has repeatedly said that he does not favor isolationism; that he desires trade and diplomatic relations with all nations; that his foreign policy is best described as “non-interventionism.” Further, he has made the argument that his views are in line with the vision of our foreign policy laid out by the Founding Fathers, and as recently as 50 years ago were the settled position of the conservative wing of the Republican Party. On these historical observations he is undeniably correct, though his critics would no doubt dismiss Washington, Jefferson, and Robert Taft as fellow “isolationists.”

But what about the argument in favor of “non-interventionism”? Typically, the folks I have heard criticize Ron Paul are conservatives who support President Bush’s foreign policy, particularly the war in Iraq. And to those critics I would say that it is simply not that case that the only options are Bush’s policies or isolationism. There is a better course. America should pursue a foreign policy of prudence, one that serves as the shield of our republic.

True conservatives, by definition, are prudent. And as such, conservatives are deeply suspicious of ideologies, whether promoted from the left or the right. This is especially the case of various efforts to perfect mankind, whether through domestic programs such as the “war on poverty,” or through military efforts to “make the world safe for democracy.”

Though Bush campaigned as a conservative (“a humble foreign policy”), in reality he has completely committed to an ideology just as misguided as Lyndon Johnson’s domestic policies or Woodrow Wilson’s foreign policies. Indeed, it is the latter parallel that is especially troubling. Wilson was convinced that American military intervention could “bring peace and safety to all nations and make the world itself at last free” (quoting his speech before Congress asking for a war declaration on Germany). Similarly, Bush declared in his second inaugural: “So it is the policy of the United States to seek and support the growth of democratic movements and institutions in every nation and culture, with the ultimate goal of ending tyranny in our world.”

American foreign policy has always been a balancing act between idealism and realism.
But objectives such as bringing peace and safety to all nations, or ending tyranny in our world, transcend idealism completely. Such hubristic aims could only emerge from the belief that American military might can do for nations what social programs can do for individuals. But just as conservatives opposed the efforts of liberals to end poverty through social engineering, we must also oppose efforts to end tyranny (or insert your favorite boogeyman: islamofacism, terror, etc) through international engineering. And, just as social programs often made the problems they were designed to solve much worse, so has it often been the case with such foreign policies. It is a bit ironic that many of the same people who attack Ron Paul as an isolationist have supported the policies of this administration which have isolated us more than ever.

Read the entire piece here.

Friday, December 14, 2007

Gold and Economic Freedom

An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense - perhaps more clearly and subtly than many consistent defenders of laissez-faire - that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.

In order to understand the source of their antagonism, it is necessary first to understand the specific role of gold in a free society.

Money is the common denominator of all economic transactions. It is that commodity which serves as a medium of exchange, is universally acceptable to all participants in an exchange economy as payment for their goods or services, and can, therefore, be used as a standard of market value and as a store of value, i.e., as a means of saving.

The existence of such a commodity is a precondition of a division of labor economy. If men did not have some commodity of objective value which was generally acceptable as money, they would have to resort to primitive barter or be forced to live on self-sufficient farms and forgo the inestimable advantages of specialization. If men had no means to store value, i.e., to save, neither long-range planning nor exchange would be possible.

What medium of exchange will be acceptable to all participants in an economy is not determined arbitrarily. First, the medium of exchange should be durable. In a primitive society of meager wealth, wheat might be sufficiently durable to serve as a medium, since all exchanges would occur only during and immediately after the harvest, leaving no value-surplus to store. But where store-of-value considerations are important, as they are in richer, more civilized societies, the medium of exchange must be a durable commodity, usually a metal. A metal is generally chosen because it is homogeneous and divisible: every unit is the same as every other and it can be blended or formed in any quantity. Precious jewels, for example, are neither homogeneous nor divisible. More important, the commodity chosen as a medium must be a luxury. Human desires for luxuries are unlimited and, therefore, luxury goods are always in demand and will always be acceptable. Wheat is a luxury in underfed civilizations, but not in a prosperous society. Cigarettes ordinarily would not serve as money, but they did in post-World War II Europe where they were considered a luxury. The term "luxury good" implies scarcity and high unit value. Having a high unit value, such a good is easily portable; for instance, an ounce of gold is worth a half-ton of pig iron.

In the early stages of a developing money economy, several media of exchange might be used, since a wide variety of commodities would fulfill the foregoing conditions. However, one of the commodities will gradually displace all others, by being more widely acceptable. Preferences on what to hold as a store of value, will shift to the most widely acceptable commodity, which, in turn, will make it still more acceptable. The shift is progressive until that commodity becomes the sole medium of exchange. The use of a single medium is highly advantageous for the same reasons that a money economy is superior to a barter economy: it makes exchanges possible on an incalculably wider scale.

Whether the single medium is gold, silver, seashells, cattle, or tobacco is optional, depending on the context and development of a given economy. In fact, all have been employed, at various times, as media of exchange. Even in the present century, two major commodities, gold and silver, have been used as international media of exchange, with gold becoming the predominant one. Gold, having both artistic and functional uses and being relatively scarce, has significant advantages over all other media of exchange. Since the beginning of World War I, it has been virtually the sole international standard of exchange. If all goods and services were to be paid for in gold, large payments would be difficult to execute and this would tend to limit the extent of a society's divisions of labor and specialization. Thus a logical extension of the creation of a medium of exchange is the development of a banking system and credit instruments (bank notes and deposits) which act as a substitute for, but are convertible into, gold.

A free banking system based on gold is able to extend credit and thus to create bank notes (currency) and deposits, according to the production requirements of the economy. Individual owners of gold are induced, by payments of interest, to deposit their gold in a bank (against which they can draw checks). But since it is rarely the case that all depositors want to withdraw all their gold at the same time, the banker need keep only a fraction of his total deposits in gold as reserves. This enables the banker to loan out more than the amount of his gold deposits (which means that he holds claims to gold rather than gold as security of his deposits). But the amount of loans which he can afford to make is not arbitrary: he has to gauge it in relation to his reserves and to the status of his investments.

When banks loan money to finance productive and profitable endeavors, the loans are paid off rapidly and bank credit continues to be generally available. But when the business ventures financed by bank credit are less profitable and slow to pay off, bankers soon find that their loans outstanding are excessive relative to their gold reserves, and they begin to curtail new lending, usually by charging higher interest rates. This tends to restrict the financing of new ventures and requires the existing borrowers to improve their profitability before they can obtain credit for further expansion. Thus, under the gold standard, a free banking system stands as the protector of an economy's stability and balanced growth. When gold is accepted as the medium of exchange by most or all nations, an unhampered free international gold standard serves to foster a world-wide division of labor and the broadest international trade. Even though the units of exchange (the dollar, the pound, the franc, etc.) differ from country to country, when all are defined in terms of gold the economies of the different countries act as one-so long as there are no restraints on trade or on the movement of capital. Credit, interest rates, and prices tend to follow similar patterns in all countries. For example, if banks in one country extend credit too liberally, interest rates in that country will tend to fall, inducing depositors to shift their gold to higher-interest paying banks in other countries. This will immediately cause a shortage of bank reserves in the "easy money" country, inducing tighter credit standards and a return to competitively higher interest rates again.

A fully free banking system and fully consistent gold standard have not as yet been achieved. But prior to World War I, the banking system in the United States (and in most of the world) was based on gold and even though governments intervened occasionally, banking was more free than controlled. Periodically, as a result of overly rapid credit expansion, banks became loaned up to the limit of their gold reserves, interest rates rose sharply, new credit was cut off, and the economy went into a sharp, but short-lived recession. (Compared with the depressions of 1920 and 1932, the pre-World War I business declines were mild indeed.) It was limited gold reserves that stopped the unbalanced expansions of business activity, before they could develop into the post-World Was I type of disaster. The readjustment periods were short and the economies quickly reestablished a sound basis to resume expansion.

But the process of cure was misdiagnosed as the disease: if shortage of bank reserves was causing a business decline-argued economic interventionists-why not find a way of supplying increased reserves to the banks so they never need be short! If banks can continue to loan money indefinitely-it was claimed-there need never be any slumps in business. And so the Federal Reserve System was organized in 1913. It consisted of twelve regional Federal Reserve banks nominally owned by private bankers, but in fact government sponsored, controlled, and supported. Credit extended by these banks is in practice (though not legally) backed by the taxing power of the federal government. Technically, we remained on the gold standard; individuals were still free to own gold, and gold continued to be used as bank reserves. But now, in addition to gold, credit extended by the Federal Reserve banks ("paper reserves") could serve as legal tender to pay depositors.

When business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. More disastrous, however, was the Federal Reserve's attempt to assist Great Britain who had been losing gold to us because the Bank of England refused to allow interest rates to rise when market forces dictated (it was politically unpalatable). The reasoning of the authorities involved was as follows: if the Federal Reserve pumped excessive paper reserves into American banks, interest rates in the United States would fall to a level comparable with those in Great Britain; this would act to stop Britain's gold loss and avoid the political embarrassment of having to raise interest rates. The "Fed" succeeded; it stopped the gold loss, but it nearly destroyed the economies of the world, in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market-triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed. Great Britain fared even worse, and rather than absorb the full consequences of her previous folly, she abandoned the gold standard completely in 1931, tearing asunder what remained of the fabric of confidence and inducing a world-wide series of bank failures. The world economies plunged into the Great Depression of the 1930's.

With a logic reminiscent of a generation earlier, statists argued that the gold standard was largely to blame for the credit debacle which led to the Great Depression. If the gold standard had not existed, they argued, Britain's abandonment of gold payments in 1931 would not have caused the failure of banks all over the world. (The irony was that since 1913, we had been, not on a gold standard, but on what may be termed "a mixed gold standard"; yet it is gold that took the blame.) But the opposition to the gold standard in any form-from a growing number of welfare-state advocates-was prompted by a much subtler insight: the realization that the gold standard is incompatible with chronic deficit spending (the hallmark of the welfare state). Stripped of its academic jargon, the welfare state is nothing more than a mechanism by which governments confiscate the wealth of the productive members of a society to support a wide variety of welfare schemes. A substantial part of the confiscation is effected by taxation. But the welfare statists were quick to recognize that if they wished to retain political power, the amount of taxation had to be limited and they had to resort to programs of massive deficit spending, i.e., they had to borrow money, by issuing government bonds, to finance welfare expenditures on a large scale.

Under a gold standard, the amount of credit that an economy can support is determined by the economy's tangible assets, since every credit instrument is ultimately a claim on some tangible asset. But government bonds are not backed by tangible wealth, only by the government's promise to pay out of future tax revenues, and cannot easily be absorbed by the financial markets. A large volume of new government bonds can be sold to the public only at progressively higher interest rates. Thus, government deficit spending under a gold standard is severely limited. The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. They have created paper reserves in the form of government bonds which-through a complex series of steps-the banks accept in place of tangible assets and treat as if they were an actual deposit, i.e., as the equivalent of what was formerly a deposit of gold. The holder of a government bond or of a bank deposit created by paper reserves believes that he has a valid claim on a real asset. But the fact is that there are now more claims outstanding than real assets. The law of supply and demand is not to be conned. As the supply of money (of claims) increases relative to the supply of tangible assets in the economy, prices must eventually rise. Thus the earnings saved by the productive members of the society lose value in terms of goods. When the economy's books are finally balanced, one finds that this loss in value represents the goods purchased by the government for welfare or other purposes with the money proceeds of the government bonds financed by bank credit expansion.

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.

Alan Greenspan originally wrote this piece for The Objectivist, published in 1966. It was reprinted in Ayn Rand's Capitalism: The Unknown Ideal. The original can be found here. Amazing how his actions differed so greatly from his words.

Monday, December 10, 2007

Quote of the Day

"It would appear that on the level of individual nations and of international relations the free market is the most efficient instrument for utilizing resources and effectively responding to needs."

-Pope John Paul II
Centisimus Anus
May 1, 1991