Our banking system came crashing down last September when securitized mortgage loans began to implode from “subprime” lending, triggering massive write-downs of assets and insolvency among some of America’s largest banks and investment houses. At that point, I experienced a personal dilemma as my president began bailing out industries, my liberal friends began circling the socialist wagons, and my fellow Republicans were offering no clear, principled, and coherent criteria by which to evaluate what I instinctively considered a travesty: massive government interference in the free market. What follows is a brief punch list of some of the finer points of a year’s learning in economics, banking, and monetary policy. Students of the Austrian school will probably learn little, however they are few enough in number to justify some expository paragraphs!
- With few exceptions, our academic departments of economics are scandalously corrupt. They are divorced from logic, pay little heed to their subject (i.e., the human being), are wrapped up in statistical and mathematical reasoning that obfuscates the true nature of the science, and have a poor epistemological base of analysis. In other words, while I initially found it hard to believe that nobody saw this mess coming, after investigating the neo-classical orthodoxies that pollute our institutions, there is little wonder why they were caught off guard. (Note: there are some good economics departments, such as that at George Mason University.)
- (Good) economics is the study of human action, and develops its theorems by deduction through logic. The seminal axiom is that man acts to achieve his goals. The entire discipline is traceable back to this self-evident proposition. Thus, its conclusions are true in all places, for all time.
- In order to understand the more salient points of economic reasoning, one must have a clear understanding of the role of money. Money (and monetization) allow for economic calculation of trade-offs, profit and loss accounting, finance and inter-temporal coordination. After pursuing a good definition of money and its manifold functions, I cannot recommend, as many may have anticipated, Milton Friedman as a guide. I would instead urge anyone interested in this line of thinking to begin with Frederic Bastiat’s “Maudit Argent!,” its English translation, “What is Money?”
- Banking has a oft-nefarious history that has, surprisingly, made me ever-so-slightly sympathetic to the scorn cast upon its practitioners by the envious left. I suffer from no blind eye when it comes to big business collusion with government, and so it was little surprise to learn that banking interests have sought (and achieved) protection from loss by influencing legislation. The most recent, glaring example in our history is the Federal Reserve system, which effectively socializes banking losses through inflation (or, to be blunt, government sanctioned counterfeiting). Long before this, however, banks had achieved a legal monopoly on a special category of fraud – or, from the industry argot, fractional reserve banking. Because of the abstract nature of this concept, and the many ways to rationalize this activity as something other than fraud, most people do not even think twice about the fact that their deposits are lent out without their knowledge in multiples of 10-100x, if they’re even aware of it. This used to result, periodically, in “runs on the bank,” which was in essence a customer check against too-lax lending. In addition to bank runs, the gold standard enforced honest accounting (compared to fiat money), and rival banks regularly exercised their right to call their loans against their more brazen competitors, providing another important check on overly-exuberant bankers. FDR changed all this permanently by attacking the gold standard, forbidding gold to be held in private hands (thankfully this has since been repealed), and creating the FDIC – a perfectly bankrupt government “insurance” program that can in no way provide deposit insurance except by continued inflation, ending the threat of bank runs.
- The cause of the business cycle is the reduction of the nominal interest rate by monetary expansion. This causes consumption habits to be skewed toward the present and the capital base – i.e., the productive means – of the economy to be eroded. Capital accumulation is undermined, and many long term, capital intensive projects that would otherwise prove unprofitable are given the illusion of profitability (e.g., home construction). The price mechanism is gravely injured by the resulting asset bubble, and out of this develops the cluster of errors that periodically plague large, industrialized economies.
- Government has an incentive to protect their banking friends, because it gives an air of legitimacy to their profligate spending (as opposed to naked monetary inflation). And so it is that the government issues debt that is purchased by banks, and ultimately backed by the money-creating entity, the Federal Reserve. The banks fund the government, and the government provides tax-funded insurance to the banks. It is a neat system that has little resemblance to a free market, and strains my ability to find anything inherently moral or even practical for the public at large. Without a gold standard there is literally no check on inflationary policy except public opinion.
- There is nothing the government can do it “plug” the problems created by monetary expansion, though they will undoubtedly look to do so because to admit impotence would likely have as a corollary accepting blame for initiating the crisis in the first place. Any further monetary expansion or deficit spending (Keynesianism) will do nothing to address the underlying reasons for economic correction. Prices must fall relative to each other, and interference will only lengthen the correction period. Worse, unrelenting monetary expansion will end in a currency collapse. Only a fool would play with such fire – a fire that would be the economic equivalent of everyone in the country suddenly being unable to communicate for a number of weeks. Yet this is exactly what neo-classical, demand oriented economics prescribes. Lamentably, neo-classical economists are, in this respect, on par with V.I. Lenin, who advised that to undermine a capitalist society the most promising means was currency debauchment.
- Both parties appear ignorant of some basic economic truths, although only the Democratic party can be called socialist. And they are, no doubt, intent on ending capitalism in the United States, whether they are cognizant of this fact or not.
It’s certainly an uphill battle, and against some powerful and well-funded interest groups, but the tax-payers must somehow regain control over the federal government. Replacing this group of Democrat Marxists with ill-informed Republicans may not be enough. There does need to be some fundamental changes in Washington, because the public is not going to tolerate many more failures of what they perceive as a “free market” before growing desperate.
The co-opting of banks by the gov’t is not exactly a new phenomenon, but I believe it could reach a crisis point in the not-so-distant future. Combined with ever-increasing national debt, this diabolical collusion is threatening our dollar. What happens when, in the midst of “the greatest crisis since the Great Depression,” we experience 20%, 30%, 50% inflation? The infamous 70’s stagflation looks rosy by comparison, that’s what. …I’d rather not be around for that.
Back a few months ago, when the Obama administration was pushing its cap and trade legislation through the House, hot off the passages of multiple massive spending bills, the prospects for America’s future looked bleak. Coupled with the reckless printing of money begun under Bush, an already heavily indebted nation could not afford to impose what would have been the most pervasive tax in the nation’s history – a tax on all energy. Cap and trade would have sent the Dow on a 1,000 point drop in a matter of hours and crippled American productive ability until its repeal.
It was then that the often maligned, often ridiculed, often looked down-upon “right wing” of the party, the talk radio audience, began to melt the Congressional phone lines. For days the effort kept pressure on key legislators, with promises of defeat if they were to throw in with the apocalypse-preaching environmental lobby. Although Speaker Pelosi, in the end, was able to twist enough arms to get the necessary votes, the severe backlash from a vocal and, frankly, pissed off public has tabled the legislation, the Senatorial vote thus far unannounced.
The same playbook has been followed with respect to the Democrats’ healthcare proposals, but unlike the esoteric and nebulous nature of “anthropogenic global warming” (“climate change,” in its new branding), this issue resonates with the majority of Americans, not just a well informed, select (albeit large) audience. The Democrats may yet choose to ignore their constituents’ wishes and push through this socialized medicine and cap and trade, but a certain political reality is becoming increasingly obvious: conservatism is on the rise, primed and ready to take back the party in Reaganesque fashion.
Sure, there are competing groups vying for control of the Republican Party. The major players are the “moderates,” the libertarians, the paleos, and the conservatives. Sure, there will be coalition building and horse trading, but the conservatives are bound to win. The why of it? Well, the “moderates,” the only challengers to the conservatives with substantial numbers, had their candidate in 2008 and got whupped, leaving us with a bona fide Marxist in the Oval Office. (Is that controversial? It shouldn’t be.) Following McCain’s tragic loss – tragic in that it resulted in the current abominable administration – Republicans aren’t exactly in a compromising mood.
Not that they need to be: conservatism offers something for everybody.
Some suggestions for the new conservative Republican leader, whomever you may turn out to be: Substantially reduce the size of government. Do so openly, all along articulating your case. Point to successes and address perceived failures with wisdom. Do not let your opponents twist the language or steer the debate. Address critics substantially, openly, and thoroughly. Claim the moral high ground and do not concede it. Use history as a guide, and correctly place this specious breed of “liberal” in their correct Genus and Species: Statist Authoritarian. When advantageous, point out how these purportedly caring Democrats always demean the private sector, encourage anger toward fellow citizens, demoralize those who wish to make a profit, and viciously demonize two of our most treasured industries – healthcare and energy. Point out how theft is illegal, yet the liberal Democrat’s advocacy of confiscatory taxes is tantamount to robbing citizens of their hard-earned wages.
One more piece of advice. Being the part of Liberty does not mean being the party of license. Do not shy away from social issues of morality. Encourage strong family values. Encourage marriage, fidelity, commitment, in addition to hard work and self-reliance. These are popular issues that need little explanation to your average American. It is the liberal Democrat that abstracts wildly these common sense notions, turning it them sheer nonsense.
Yes the Republican Party is on the ascendancy under conservatism. The Obama administration, meanwhile, sinks lower and lower into unpopular impotency. It is crucially important we do not lose our way in the trappings that come with power. The welfare statism that has characterized America since FDR must slowly be reversed if we are to preserve American freedom for posterity. Only when Republicans begin acting like conservatives will we have any tangible gains to show to voters.
Former NYYRC President Rick Brownell argues that the treatment of Patterson has absolutely nothing to do with his skin color, but moreso to do with his inability to work with the most dysfunctional legislature in the country. This is the same body he was a member of for many years. With a 3o% approval rating, how can Patterson believe otherwise?
Check out Rick’s Column on the New Majority: http://www.newmajority.com/nothing-personal-patersons-just-a-bad-governor
Fred Barnes has a great one in the latest Weekly Standard: Death of a Salesman.
A candidate can get away with speeches that are glib and vague. A president can’t. “It’s easy to sell ice cream,” says Don Stewart, the spokesman for Senate Republican leader Mitch McConnell. “It’s hard to sell rum raisin ice cream.” Obama’s problem is he hasn’t learned the difference.
Check out this interesting little gem in the Village Voice about how paid New York City Council staffers found time during petitioning season to gather signatures to get Speaker Christine Quinn on the ballot in District 3 for the upcoming election.
But, wait, is that legal? Well, if they are doing it on their own time, yes it is. But I challenge you to find me one intrepid signature fetcher who was able to pull this off after hours: “obtaining 55 signatures for the speaker. She went from 12th Street to 21st Street, and from Bleecker Street to Greenwich Avenue.”
Some long-time New Yorkers will tell you it’s a small town after all. But baby, it ain’t that small.
Check out the following link for an interview with New York Congressman Anthony Weiner in which he advocates for Medicare for every American: http://themoderatevoice.com/43558/anthony-weiner-tears-off-the-mask/
He seizes on Medicare’s “4% overhead” as an argument in favor of government health insurance. He actually claims that the government program is more efficient than private industry. Well, here is an article explaining how he uses a “statistical sleight of hand” to make his liberal agenda more palatable:
Medicare spends more on medical care and relatively less on administrative costs than private insurers because its pool of patients is older and requires more care than the general population. That does not mean that Medicare is efficient or that it spends less real money on administration – it just means that it spends a lower percentage of its budget on paperclips and highlighters. Furthermore, the congressman fails to recognize that Medicare has economies of scale that make the comparison with private insurers sort of like comparing Wal-Mart to a bodega, if Wal-Mart could require every bodega to comply with 1,000 pages of paperwork every year. Oh, and I almost forgot to point out the obvious that Medicare has no advertising costs and no profit motive to cut down on fraud. If it did, it would justifiably spend more on administration.
Before I wrap this up, I have one other point worth mentioning – it is my understanding that American seniors are required to pay about $100 per month for Medicare as their secondary insurance provider, even if they have purchased their own primary health insurance. That is, quite simply, an age tax. So, the “public option” that exists right now for senior citizens looks more like a requirement. I wonder how that would work out if it were expanded to cover every American during a recession when unemployment is near 10%.
For Immediate Release
Contact: Kristine Nalbone
NYYRC PR Committee
The New York Young Republican Club, Inc. Hosts Randall DeSoto at August Monthly Meeting
NEW YORK, NY – The New York Young Republican Club (NYYRC) will host Randall DeSoto on August 20, to speak about his new book We Hold These Truths – which will be available for purchase at the NYYRC August monthly meeting and on Amazon, as well as B&N.
Randall DeSoto is a graduate of the United States Military Academy at West Point with a degree in political science. He holds a juris doctorate from Regent University School of Law and is a member of the Pennsylvania and Virginia bars. DeSoto’s life experiences and travels make We Hold These Truths come to life. As a West Point cadet, he participated in battlefield tours of Normandy and Great Britain and following graduation served as an armor officer in the Army’s 4th Infantry Division. He researched all major locations found in the book from Boston to Bastogne. DeSoto has been published in Townhall Magazine and maintains a blog on Townhall.com. He lives in Pennsylvania and recently began work on a documentary film about the dangers of an over-encroaching government.
Aside from our guest of honor, we have a lot of exciting events coming up the pipeline to discuss at our monthly:
- Recapping successful social at Johnny Utah’s/upcoming social at Bourbon St.
- Campaigning for Bloomberg and Chris Christie
- Petitioning nights to begin in September
- Tentative debate night for City Council candidates
- Community Outreach Chair appointment
Hope to see you August 20th!
Additional details for the event are as follows:
Women’s National Republican Club, 3 West 51st Street between 5th and 6th Avenues, from 7-8:30pm
About the NYYRC:
The New York Young Republican Club, Inc., is a not-for-profit political organization that exists to bring Republicans aged 18-40 together to discuss the Republican Party platform and aid the Republican Party in the education of the public about the Republican agenda and the promotion of Republican candidates for office. To find out more about the New York Young Republican Club, Inc. please visit the Website at http://www.nyyrc.com.
Congressman Nadler “Town Hall” Conference Call – 7:10PM tonight
Instead of standing up infront of the people that he represents nd have a true town hall meeting, the Congressman opted for a Conference Call.
Listen In – the call starts at 7:10PM tonight.
Representative Massa, in NY’s Southern Tier, has decided that it would be in the best interest of his constituents to vote against what they believe to be their best interests.
Did I miss something? Aren’t our Representatives elected by the people? Aren’t they suppose to represent the people?
What I find completely abhorrent is the arrogance that comes with making the following claims:
Helpful to who?? Everyone outside of your district I’m assuming.
Congressman, your constituents are not stupid. They know what they want and what they need. At one time, they wanted you to represent them in Washington. I believe that will change if you continue to represent your district in this all-knowing manner.
Kyle Stone wrote a terrific piece today in the American Thinker showing how the GOP must not disintegrate into a “Southern” party. Over the past few weeks, I have spent some time reevaluating where and how the GOP will get back into power. I have to say that I see Stone’s point crystal clear. The Republican Party became popular under Reagan and Eisenhower, because they embraced all people who wanted to join them in their vision for America. They didn’t say that their followers had to agree with all of their policies, but just with their central ideas for America. President Obama did this masterfully in the 2008 election by convincing many Americans that he was a post-partisan “change” candidate who believed our country could be great once again. Americans had heard that optimism before from Ronald Reagan and Bill Clinton, and bought it once again.
The key to winning in politics, and winning big, is not policy or principles, but guidance and leadership. Southern Republicans are nervous to make the GOP a “Big Tent” party , because they could lose their precious roles as power brokers. The GOP won’t win if they just stand up for their principles, but rather need to find a leader who can inspire America to be great once again. Like Eisenhower after World War II and an unpopular Truman presidency. Like Reagan after the economic difficulties and foreign policy weakness under Jimmy Carter.
Everyone wants to point to health care or the deficit as the reasons for President Obama’s current drop in the polls. but that is wrong. The reason Obama is tanking with the public is for his LACK OF LEADERSHIP. Nobody feels confident that our president really wants America to be great. He never speaks of the great job our troops are doing and have done in Iraq and Afghanistan. He always talks of saving jobs and not creating jobs. He looks at our weaknesses on race now and in the past, rather than our hope to become more diverse and tolerant.
The American people want a leader who will uplift their spirit and give them the tools to create a better life for themselves and their families. They want a leader who will make them proud to be an American, not ashamed of it. Obama was elected because he made Americans feel good about themselves and he inspired them to dream that anything was possible in our country. Now…in his first six months…he taken away America’s desire to aspire to greatness. Most Americans think the country is going in the wrong direction and don’t have much “hope” that the economy will turn around anytime soon. They are scared of Obama’s spending and believe he is bankrupting our country for future generations. Americans are ready to consider what the GOP has to offer, so they need to provide one thing and only one thing to the American people: LEADERSHIP.
Leadership has been hard to find in Washington from the GOP these days as they seem to be holding the ball at the end of the game, hoping they a chance to win it with a field goal in 2010. This is the wrong approach. The GOP must “push the ball” down the field and put a full out attack on the Dems in order to take back Congress and potentially the presidency in 2012. They must come up with an innovative vision that will help Americans see greatness ahead in the 21st century and not constant difficulty.
The party must find politicians in the Northeast and Midwest that can convey its principles in a way that is inclusive and not exclusive. The problem with the Republican Party is that it is afraid to go away from the policies and rhetoric that rally its conservative base in the South. However, conservatism and Republicans were always a party about embracing individual liberty, promoting the individual, and protecting freedom. It has sadly spun into a party that is more worried about regulating who can belong, then reaching out to those looking for a set of ideals to embrace.
The Republican Party of the 21st Century must not be one that sees conservatism as a rejection of the modernization of social mores, but one that embraces the individualism that is a fabric of today’s America. No longer are Americans strapped down to their local communities, but rather connected to all parts of the world through technology and innovation. It is a time where you can as easily talk to someone in Texas as down the block and see an Olympics in China as clear as looking at your neighbors car down the road. Collectivism is dead in America, and Republicans have an opening. President Obama believes in community as a way to deliver prosperity to Americans. However, his community is one of local plants and jobs that come from big manufactures. He doesn’t see the America that is emerging around small business, individual enterprise, and a rejection of large institutions.
America is a country that has rejected newspapers, American car companies, broadcast networks, and corporations all in the past few years. People are afraid to rely on anybody but themselves and are tired of the fear mongering in Washington whether it be over Iraq or the economy. With the power of the Internet, Americans know clearly what’s going on in DC and just want politicians to cut with the crap. They want a no nonsense leader who will shoot straight with them and not act as if they are children. Obama failed to see that Americans weren’t demanding a nanny state, but rather reason and sensibility in Washington. They saw President Bush as too much of a cowboy and wanted a “thinker” in the White House. However, Obama has not been a “cowboy” or a “thinker,” but rather an “idealist.”
It is time for the GOP to adopt the mantle of the “Party of Reason.” The party that makes decisions based on real world conditions and results, rather than ideology. Their principles should solely align with helping others help themselves. It should get rid of all pork barrel projects, entitlements, and social engineering in favor of promoting enterprise and ambition from ndividuals and the private sector.
It will be interesting to see which presidential candidate emerges in 2012, but Mitt Romney and Sarah Palin have to be the front runners. Sarah Palin is a self-made women from Alaska who became an unlikely governor (that didn’t even last her term) and helped boost a sagging McCain campaign by rallying the conservative base. Can she channel her frontier appeal to grab moderates who want more freedom from statism? Mitt Romney is a very successful businessman who knows how to grow jobs in the private sector. However, can he connect with small town voters who are weary of corporations and Wall Street.? Well, it will all depend on messaging and how both candidates as well as others who enter to race connect with Americans desire to limit the current runaway bureaucracy in Washington DC. One thing for sure is the Bible-thumping Southern Republican, doesn’t have a prayer to win. Pun intended. Americans don’t want to be lectured about how to live moral lives, but rather lead to an era of progress and stability by a great President and Congress. It’s time for Americans to stop letting cultural preferences divide us, but rather rally around all that unites us.