Sunday, November 28, 2010

Interview of Dr. Mark Skousen at The Daily Bell

These comments are in reply to the interview found at:

@DB, I can understand why your afterthoughts went the direction they did, in order to deflect from the less than compelling comments by your interview subject. This was one horrific set of comments by your interviewee.

First of all, his five questions: talk about dancing on the periphery. These are questions of the type one would ask if one believed tinkering on the edges of a corrupt system would actually change things.


“Europe is cutting back on government spending…”

Where, exactly is this happening? As far as I can tell, there may be reductions on what was planned for growth…at best. But when a EUR 10 billion "cut" is accompanied by a EUR 100 billion bank bailout, tell me, where exactly is the reduction in government spending?

“…while engaged in monetary expansion…Of course, libertarians do not believe in managing the economy through central banking, but we are stuck with the system we have.”

What libertarian speaks like this? We are also “stuck” with the system of politicians spending more money than they take from the governed, but Skousen has no trouble speaking against this.

“Within the parameters of this system, monetary expansion is likely to be more effective than government spending…”

Who says? Austrians would take honest money over balanced budgets, knowing the former is a much greater provider of discipline on the latter than the other way around. Creating play money sends the worst of all signals to the market, as “money” is the most basic building block in any free-market, capitalistic system. Government deficits, honestly financed, are far less distortive to the economy than printing funny money.

“Since then, I have argued that once you have gone off the gold standard it is very difficult to go back on it because it would cause a major redistribution of wealth to the gold holders who tend to be speculators and wealthier individuals.”

THIS is the big concern? As opposed to the major distributions of wealth caused by fiat money? So the scam artists who siphoned trillions from the bubbles created over the last 100 years can continue their game, but those who happened to rightly see the end of the scam approaching should not be allowed to be kept whole? The and real estate thefts can continue, but not a return to honest money?

And, it isn’t so difficult to return to a gold standard. Just allow competition in money, without legal tender laws or other tax consequences that penalize one choice over another. The market will resolve this false difficulty, and reasonably smoothly.

Where to begin regarding his discussion of the EU? He could have done a much better job separating the issue of the EU from the Euro, and his answer was fully supportive of the benefits of aggregation of government power in ever higher and less accountable forms.

“Have you ever seen the picture of how much water is surrounding the China sea and how much they consider is theirs? It's not 200 miles – it just keeps going and going.”

He is worried about China? Take out “China sea” from his quote and insert “United States.” This will make the perspective of his viewpoint much more clear.

“The majority of time Americans are problem solvers; the sun eventually comes out again. Traditional bond and stock markets perform better. It would be sad commentary if we didn't have that kind of situation. It would be like being a millionaire on a sinking ship. Who wants to be a millionaire on the Titanic?”

This quote could have come from any number of drug peddlers at the NY Times. It does nothing to properly address the current situation of the United States or the rest of the world.

“So, I am optimistic that we will get new leadership, reasonable policies and sound economics.”

The answer will be found in politics? Seriously?

“They paid me $100,000 in advance for Econopower.”

Who cares?

DB – I would appreciate seeing the list of the other speakers you have coming to your event in April. It is sad commentary if Skousen is representative of the conference. Your writing and philosophy are a world away from his comments. I do not understand why there would be such a connection….

Tuesday, November 23, 2010

Ron Paul and Focus

This post is in reply to points made by Lila Rajiva and the subsequent discussion at The Daily Bell regarding Ron Paul and his focus.

The subject article is entitled "End of the Fed?" and can be found at


Re Ron Paul, I don't have any answers for you; I will only put a few thoughts out there. If they add value, so be it; if not, it won’t be the first time for me.

Unique Selling Proposition (USP). In order to be truly successful, one must have one and stay focused on it. I don’t speak only of businesses, but certainly also of those who want to effect change, change opinion, educate, etc.

What is Ron Paul's USP? He seems quite focused on increasing individual freedom and reducing the power of the state. He seems to have chosen two critical areas to focus on in this regard: 1) Centralized money power, manifest in the FED, and 2) Military and foreign policy intervention by the US in the rest of the world.

I cannot disagree that these are two of the biggest items to knock down if we are to have some chance to move toward liberty and peace. I keep reflecting on the four planks of the Daily Bell/Tea Party platform, of which these are two (the others being separation of education and state, and ending the drug wars/prohibitions). If one stays focused on any one of these items, and affects change in the dialogue of the same, they have really done good work, and can be said to have had some real fulfillment in life. Other encroachments are enabled from these four (actually, end either central banking or government funding of education and the other three would likely start to crumble on their own).

Ron Paul certainly has changed the dialogue as it relates to the FED. I believe I stand on safe ground stating that the national dialogue on the FED would be quite different today had he not run for President three years ago – yes, he was assisted by the internet and the financial crisis, but I look to him as the messenger.

So why not go after Goldman Sachs, etc? When I have heard this come up to him (if my memory serves), Dr. Paul always goes back to the root – the FED. Strike at the root and the tree cannot stand. In any case, the prosecutions will come as sure as I am typing right now. As the economic world continues to implode, the anger will be deflected by going after the bankers and other such participants who are also actually just pawns. The politicians will do this to try to save their own skin. The bankers will be sacrificed if it means saving the system or postponing the killing of central banking.

As to September 11, I also do not recall him making strong statements about getting at the facts – certainly a new investigation is in order. But to press this might seem to take away from his USP. Yes, what might it cost him to take a few minutes or days to work on this? The issue is, no organization or individual can thrive if they go after every battle worth fighting. (Yes, the battles one chooses, or chooses to avoid, say something.) I go back to USP, and cannot disagree with the battles he has chosen, and see each one as a full time job.

Rosa Parks: the most I recall is he had to comment about why he voted “no” on some commemoration. Ron Paul never raised the issue; he was reacting to an item brought up for vote. He volunteered to put up the money out of his own pocket if the other congressman would do the same. They obviously preferred to spend OPM. To the extent he has had to defend his position, he has spoken on this. But I have not seen him proactively raise this issue. I might be wrong.

So, I see Ron Paul as one who is trying to stay on message. I believe he rightly sees that if he goes after all targets in all corners that he would lose his effectiveness in going after the items he feels most crucial – you might feel other items are more crucial, but as I said before, I cannot disagree with the battles he has chosen. He would certainly add to the list of people going after him. This would absolutely diminish his effectiveness in his key topics, his USP.

In any case, my two cents. If it is worth even less, apologies to DB for stressing the server.

Wednesday, November 3, 2010

More Antal Fekete Fallacies

This is in response to Dr. Fekete's editorial at The Daily Bell, and a further response to some of his positions regarding Real Bills.

The editorial at the Daily Bell can be found here:

Dr Fekete: “I made the central point that the source of commercial credit is not saving but consumption.”

Fekete’s most fundamental flaw is that he confuses money with savings. It is the same flaw behind every Keynesian and Monetarist. It is the flaw behind Bernanke and Greenspan. However, he does not limit himself to this one flaw.

He goes on to use an example of disappearing banks. Paper is wealth. However, his example is flawed. If banks disappear, the wealth does not. There are still farms. There are stores of grain. The previously built factories still exist. My home still provides shelter.

The problem is he cannot be more precise in his example – because it would expose the fraud of his claim, quoted above. In his example, we all starve if the banks disappear, except for the miracle of RBD. However, as is clear, starvation may (or may not) come only to the extent that real wealth disappears. If the real wealth disappears, his Real Bills will not save him, as SOMETHING must fund production. The worker must eat while he is engaged in producing something else for later consumption.

It is unequivocally true, that if all the WEALTH disappeared, there absolutely must be savings to support production. I can’t fund a fishing net unless I have caught and saved enough fish to last the ten days it will take me to fabricate the net. But Fekete cannot make this more accurate observation, because it would expose him.

Fekete confuses financing with funding. He makes the case that real bills can finance the production of goods, but there is no funding to support this financing. Funding can ONLY come from savings. Paper cannot fund production. Only goods ready to be consumed can fund production.

Consider: while a good is in production, those employed in producing that good must eat. By definition, they cannot eat what they are producing, as it is in production. They cannot trade it for food; after all it is in production. Without someone previously having saved food, where would they get their food?

Will they eat real bills? Of course not. But perhaps they could trade the bills for food. In that case, someone had to SAVE food for there to be a trade. Financing is not funding. This is the exact same false belief system of Ben Bernanke. By creating money, we will increase the economy. But the money doesn’t satisfy the need for food. Only food does.

More importantly, now inflation is absolutely introduced into the system. The bills, drawn on unfinished goods that are not ready for consumption, are an increase to the money supply – competing to purchase the food someone else has saved. The paper Real Bills are now competing with the previous stock of money. By definition prices will be higher than they otherwise would be SOLELY due to the introduction of this fiduciary media. This conclusion is unavoidable.

The entire motivation for RBD is to fund something that (supposedly) otherwise could not be funded. Fekete is clear: absent RBD, there would be many not able to compete in the market to purchase previously finished goods available for consumption. How does this not raise prices higher than they otherwise would have been absent RBD? Every economics discipline recognizes that the moving of the demand line higher raises prices for a given supply. The supply of finished goods has not changed, yet the demand curve has shifted. This is the consistent and unavoidable result of relying on paper printing for “money.”

Fekete goes further to argue that there isn’t enough gold coin to satisfy the funding needs of production. But gold doesn’t fund anything in the basic sense – one cannot eat gold. Gold historically has been used as a store of wealth and medium of exchange, with the benefit of Mother Nature providing the discipline to minimize the manipulations of man. Gold does not fund production – actual goods fund production. Fekete ignores this most basic fact of survival.

There is no distinction between the funding of working capital and fixed capital. In both cases, savings of previously completed goods MUST be consumed while the production is performed. Whether for a week or five years, the worker must eat while he is in the process of manufacturing a good not yet ready for final consumption. From where will he get the food, unless someone has previously saved it?

Further, it is claimed that Real Bills serve as a clearing mechanism. But this is a solution looking for a problem. Gold can clear, as can any other object society chooses to use as money can clear.

I will clarify. There are these things called computers. These computers can hold records of gold (or other specie) balances for individual account holders. The gold holdings of each individual account holder can be divided and subdivided almost infinitely, as the computers can handle an infinite number of digits to the right of the decimal, thus dividing the gold into infinite fractions of ounces or grams. Gold is, both physically and virtually, quite divisible.

There is modern communication technology. This technology allows instant communication anywhere around the globe. It is capable of handling countless billions of transactions per day – or per hour or minute, if you like.

The physical gold does not have to move a billion times per day. Balances can be netted daily or otherwise as the market determines. Private clearing houses can be established to net the balances. See what James Turk is doing. Is this not a living example of how gold can be directly used as money?

Antal Fekete, like Ellen Brown, is (to take one from Dr. North) a wolf in sheep’s clothing, and should be recognized as such. Like Ellen Brown, he starts by speaking the language of sound money, the disasters of the current banking system, etc. This draws people in. “He doesn’t like Ben Bernanke. He doesn’t like the banking cartel.” However, he takes Ellen Brown one step further – to draw in the seemingly hard-money crowd. “He believes gold is the ultimate extinguisher of debt” This sounds good to people, he is talking about the problems of the current system correctly. He mentions gold.

Once he has them in the tent, he sells them a bill of goods (a Real Bill of goods?). He promises wealth simply by the creation of paper. He says this paper will create wealth without inflation. He says we don’t have to rely on savings for credit. Once he has them in the tent, he talks like a central banker. Any apologist of a central bank uses the exact same words, and these words have the exact same meaning and will produce the exact same results.