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Review of “The Transhumanist Wager” by Zoltan Istvan – Article by Kyrel Zantonavitch

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Categories: Fiction, Philosophy, Transhumanism, Tags: , , , , , , , , , , , , , , , ,

The New Renaissance Hat
Kyrel Zantonavitch
August 20, 2014
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The Transhumanist Wager by Zoltan Istvan is available on Amazon in paperback and Kindle formats.

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This is the best novel I’ve read in over 30 years! I don’t ever expect to see its like again. Fascinating, amazing, and shocking to the point of numbness.

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It’s rather comparable to Atlas Shrugged — the earth-shaking epic and classic by Ayn Rand from 1957. It has Atlas Shrugged’s magisterial story sweep and stunning philosophical ambition. It has Rand’s quasi-god-like heroism too. And like the other novel, Zoltan Istvan’s book is looking to mercilessly conquer the world.

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Let’s hope!

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Mr. Istvan’s thunderous 300-page saga, The Transhumanist Wager, is a truly remarkable novel of ideas. It’s unique. It has no peers or rivals. And it’s completely unexpected and unprecedented.

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Like Atlas Shrugged, it offers many formidable intellectual challenges. One or two of these I’ve yet to work out. Like Rand’s lengthy magnum opus, The Transhumanist Wager is mesmerizingly philosophically bold and rich. And like Atlas, it’s rather repetitive in introducing these dynamic, new ideas to a silently dumbfounded world. But at least you clearly know where each novelist-philosopher stands on the issues, and what controversial and ferocious thing they each have to teach us.

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I find this to be an unapologetically extreme and revolutionary book. A true tour de force and deep-thinking book which comes at all of us from out of the blue. If you don’t read it, you’re fatuously and tragically missing out. Wager is a historical game-changer, and likely to spark a new era in mankind’s evolution. Humans will never be the same.

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It seems a shame and crime to give away virtually anything in the plot, so I’ll keep it very light. The hero of the story seeks a truly astounding level of personal growth and, simultaneously, human evolutionary ascent. He effectively threatens to dethrone Zeus himself. Whether Jethro Knights — the alter ego of Zoltan Istvan – actually achieves this is something the high-intelligence, high-virtue reader will have to find out for himself.

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This book is jaw-droppingly ambitious and powerful. It’s also massively persuasive. The novel is filled with energy, zealotry, ferocity, honesty, courage, and heedless impetuosity. A visionary and fundamentalist book of gigantic and fearless integrity which is almost utterly loyal to its own monumental and yet somewhat narrow beliefs. But make no mistake: these ideas and beliefs are world-rocking.

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Ultimately, Mr. Istvan is a slightly but significantly limited philosopher. He’s not an Objectivist, and isn’t that familiar with Ayn Rand’s intellectual beliefs and theories, evidently. Still, I consider Zoltan Istvan to be an immensely powerful neoliberal thinker and a formidable cultural warrior. He fights for the Good Guys; and he aims to capture a great deal of the future. Amazingly, Mr. Istvan may have come to these ultra-high-level theories and points of view without having had much help from today’s leading neoliberals: the economic Austrians, the political libertarians, and the philosophical Objectivists. Maybe Zoltan Istvan just used his own exceptionally high virtue and Herculean fearlessness to derive his “transhumanist” philosophy from the classics of human literature and intellectualism, especially the Greeks, Romans, Renaissance, and Enlightenment thinkers. Astonishing, if true!

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And yet…Mr. Istvan isn’t that strong a neoliberal. He, his hero, and this novel don’t entirely believe in the epistemology of reason, the ethics of individualism, and the politics of liberty.

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Still, what a dynamo and hero this Zoltan character is! What a vivacious, ferocious, and catastrophic cultural warrior! Mr. Istvan is a one-man wrecking crew of contemporary culture and evidently a magnificent being of immense and singular stature. Or at least his alter ego in the story is.

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Altho’ the ideas inside somewhat overwhelm it, The Transhumanist Wager is a genuine novel which tells a dramatic, wonderous, and wide-ranging tale. The plot is exciting, involving, and enthralling. The characters are generally believable, often archetypal, and sometimes indelible. This is a heroic epic which transverses the entire planet and overwhelmingly impacts all of mankind.

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I also found this book to be a hugely enjoyable, winding, and suspenseful yarn. It’s great fun to read, and even more fun to think about.

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Overall I consider Zoltan Istvan’s The Transhumanist Wager to be outstanding as a novel, and even better as a book of theoretical and practical philosophy, regarding the shooting-star ascent of man, and our soon-to-be superhuman future.

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Kyrel Zantonavitch is the founder of The Liberal Institute  (http://www.liberalinstitute.com/) and a writer for Rebirth of Reason (http://www.rebirthofreason.com). He can be contacted at zantonavitch@gmail.com.

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MILE Activist Contest II Entry: Life-Extension Game Developers’ Matching Fund – Post by G. Stolyarov II

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Categories: Transhumanism, Tags: , , , , , , , , , , , , , , , , , , , ,

The New Renaissance Hat
Gennady Stolyarov II
August 18, 2014
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This is Mr. Stolyarov’s entry into the Movement for Indefinite Life Extension (MILE) Activist Contest II.

Computer games are a powerful way to spread the message of indefinite life extension to a new demographic. By engaging the players through art, concepts, and gameplay elements expressing the feasibility and desirability of indefinite lifespans, computer games can attract interest in life-extension activism that will be perceived as leisure and entertainment by those who engage in it.

If I had $5,000 to devote to raising awareness about people, projects, and organizations wording toward indefinite life extension, I would create a matching fund for fundraising projects pertaining to life-extension-themed computer games currently in development. This Life-Extension Game Developers’ Matching Fund (LEGDMF) would match, dollar for dollar, the funds raised via Indiegogo, Kickstarter, and other crowdfunding platforms by game developers whose works would meet the following criteria:

(i) The game should promote and express the message of indefinite life extension in a favorable way.

(ii) The game should enable the player to find out about some of the people, projects, and organizations working toward indefinite life extension.

(iii) An alpha, beta, or demo version of the game should exist and be playable by the general public.

(iv) The game developers must be willing to publicly disclose the amount of funds raised, either through a fundraising platform or through information they post directly on a publicly viewable website.

A great example of a life-extension-themed game, whose gameplay also deeply integrates the pursuit of longevity escape velocity, is LEV: The Game , which is currently in the midst of an Indiegogo fundraiser. (For more details, read my recent article about LEV: The Game.) LEV: The Game would be one of the efforts, but not necessarily the only effort, which could be greatly aided by the LEGDMF.

The purpose of a matching fund is to bring in additional resources by enabling any donor to leverage the impact of his or her contribution. Instead of selecting eligible games through a contest where a panel of judges or the contest organizer(s) would decide upon the winning entries, a matching fund enables donors from the general public to vote with their money and helps these votes to matter more in influencing real-world outcomes. The LEGDMF would continue to match contributions to eligible game-development projects, dollar for dollar, until the $5,000 fund is exhausted.

An advantageous feature of the LEGDMF would be that all the money could be given directly to eligible game-development projects. Fundraising platforms would collect fees ranging from 4% to 9% of the funds donated, and payment platforms – such as PayPal or payment processors employed by banks – would collect additional fees. However, it would be unlikely that the total fees would exceed 15% of the funds contributed, meaning that more than $4,250 (85% of $5,000) would substantively benefit game developers in their efforts to create engaging, immersive, and entertaining portrayals of the life-extension message.

Success for the LEGDMF would be measured by the ability to successfully fund the creation of a life-extension-themed game (or even multiple games) and, ultimately, by the release of such a game to the general public and the amount of engagement (number of plays or number of downloads) that the game would receive. A nearer-term measure of success would be the ability to attract sufficient interest in life-extension-themed games as to raise $5,000 in independent contributions from the general public, which would exhaust the LEGDMF through matching donations – leading to a total of $10,000 in funds invested in this worthwhile goal of informing new demographics about life extension through an exciting and innovative medium.

The demographics that could potentially be attracted by life-extension-themed computer games would include anybody who plays computer games for entertainment. Gamers come in all ages, but there are many children and teenagers among them, who could become vital members of the next generation of scientists, technologists, philosophers, and activists working in pursuit of indefinite longevity. These individuals would discover the life-extension-games once they are released on various online sites. Depending on the game, these could be flash-game sites that allow the games to be played for free, or these could be sites offering files for download. While no game can guarantee a specific number of players, games that are designed well and have an innovative premise would attract a large user base through the appeal of the gameplay itself. A game that catches on and achieves a steady following could even revolutionize the public perception of indefinite life extension and bring the idea of pursuit indefinite lifespans into the cultural mainstream.

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Liberation, Op. 20 (2003) – Musical Composition and Video by G. Stolyarov II

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Categories: Music, Tags: , , , , , , , , , , , , , , , , , , ,

The New Renaissance Hat
G. Stolyarov II
August 17, 2014
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This 2003 composition by Mr. Stolyarov, written in a mid-19th-century style, reveals the true nature of liberty as experienced by the creative mind, not free from all order, but free to create and relish an order of one’s own.

Download the MP3 file of this composition here.

See the index of Mr. Stolyarov’s compositions, all available for free download, here.

The artwork is Mr. Stolyarov’s Abstract Orderism Fractal XVI, available for download here and here.

Remember to LIKE, FAVORITE, and SHARE this video in order to spread rational high culture to others.

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What Have We Accomplished in Iraq? – Article by Ron Paul

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Categories: History, Politics, Tags: , , , , , , , , , , , , , , , , ,

The New Renaissance Hat
Ron Paul
August 17, 2014
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We have been at war with Iraq for 24 years, starting with Operations Desert Shield and Storm in 1990. Shortly after Iraq’s invasion of Kuwait that year, the propaganda machine began agitating for a US attack on Iraq. We all remember the appearance before Congress of a young Kuwaiti woman claiming that the Iraqis were ripping Kuwaiti babies from incubators. The woman turned out to be the daughter of the Kuwaiti ambassador to the US and the story was false, but it was enough to turn US opposition in favor of an attack.
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This month, yet another US president – the fifth in a row – began bombing Iraq. He is also placing in US troops on the ground despite promising not to do so.

The second Iraq war in 2003 cost the US some two trillion dollars. According to estimates, more than one million deaths have occurred as a result of that war. Millions of tons of US bombs have fallen in Iraq almost steadily since 1991.

What have we accomplished? Where are we now, 24 years later? We are back where we started, at war in Iraq!

The US overthrew Saddam Hussein in the second Iraq war and put into place a puppet, Nouri al-Maliki. But after eight years, last week the US engineered a coup against Maliki to put in place yet another puppet. The US accused Maliki of misrule and divisiveness, but what really irritated the US government was his 2011 refusal to grant immunity to the thousands of US troops that Obama wanted to keep in the country.

Early this year, a radical Islamist group, ISIS, began taking over territory in Iraq, starting with Fallujah. The organization had been operating in Syria, strengthened by US support for the overthrow of the Syrian government. ISIS obtained a broad array of sophisticated US weapons in Syria, very often capturing them from other US-approved opposition groups. Some claim that lax screening criteria allowed some ISIS fighters to even participate in secret CIA training camps in Jordan and Turkey.

This month, ISIS became the target of a new US bombing campaign in Iraq. The pretext for the latest US attack was the plight of a religious minority in the Kurdish region currently under ISIS attack. The US government and media warned that up to 100,000 from this group, including some 40,000 stranded on a mountain, could be slaughtered if the US did not intervene at once. Americans unfortunately once again fell for this propaganda and US bombs began to fall. Last week, however, it was determined that only about 2,000 were on the mountain and many of them had been living there for years! They didn’t want to be rescued!

This is not to say that the plight of many of these people is not tragic, but why is it that the US government did not say a word when three out of four Christians were forced out of Iraq during the ten year US occupation? Why has the US said nothing about the Christians slaughtered by its allies in Syria? What about all the Palestinians killed in Gaza or the ethnic Russians killed in east Ukraine?

The humanitarian situation was cynically manipulated by the Obama administration —  and echoed by the US media — to provide a reason for the president to attack Iraq again. This time it was about yet another regime change, breaking Kurdistan away from Iraq and protection of the rich oil reserves there, and acceptance of a new US military presence on the ground in the country.

President Obama has started another war in Iraq and Congress is completely silent. No declaration, no authorization, not even a debate. After 24 years we are back where we started. Isn’t it about time to re-think this failed interventionist policy? Isn’t it time to stop trusting the US federal government and its war propaganda? Isn’t it time to leave Iraq alone?

Ron Paul, MD, is a former three-time Republican candidate for U. S. President and Congressman from Texas.

This article is reprinted with permission from the Ron Paul Institute for Peace and Prosperity.

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“La muerte está mal” – Spanish Translation of “Death is Wrong” – Translated by Néstor Duno – Post by G. Stolyarov II

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The New Renaissance Hat
G. Stolyarov II
August 16, 2014
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The Spanish translation of Death is Wrong – La muerte está mal – generously translated by Néstor Duno – is now available via The Rational Argumentator, Amazon, and Createspace.

A paperback version can be obtained from Createspace for $9.13 here.

Amazon has begun to carry the paperback version for $8.67 here.

The Kindle version is available for $0.99 (the lowest price Amazon permits) here.

Also, a free PDF version is available here.

You have my permission to spread the electronic version of the book to Spanish-speaking audiences as widely as possible, with no strings attached.

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Ontological Realism and Creating the One Real Future – Article by G. Stolyarov II

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The New Renaissance Hat
G. Stolyarov II
August 13, 2014
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An ongoing debate in ontology concerns the question of whether ideas or the physical reality have primacy. In my view, the physical reality is clearly ontologically primary, because it makes possible the thinking and idea-generation which exist only as very sophisticated emergent processes depending on multiple levels of physical structures (atoms, cells, tissues, organs, organisms of sufficient complexity – and then a sufficiently rich history of sensory experience to make the formation of interesting ideas supportable).

One of my favorite contemporary philosophers is David Kelley – an Objectivist but one very open to philosophical innovation – without the dogmatic taint that characterized the later years of Ayn Rand and some of her followers today. He has recently released a video entitled “Objective Reality”, where he discusses the idea of the primacy of existence over consciousness. Here, I seek to address the primacy of the physical reality in its connection with several additional considerations – the concepts of essences and qualia, as well as the implications of the primacy of the physical reality for human agency in the pursuit of life and individual flourishing.

Essences

Some ontological idealists – proponents of the primacy of ideas – will claim that the essence of an entity exists outside of that entity, in a separate realm of “immaterial” ideas akin to Plato’s forms. On the contrary, on essences, I am of an Aristotelian persuasion that the essence of a thing is part of that very thing; it is the sum of the qualities of an entity, without which that entity could not have been what it is. The essences do not exist apart from any thing – but rather any thing of a particular sort that exists has the essence which defines it as that thing – along with perhaps some other incidental qualities which are not constitutive to it being that thing.

For instance, a chair may be painted blue or green or any other color, and it may have three legs instead of four, and it may have some dents in it – but it would still be a chair. But if all chairs were destroyed, and no one remembered what a chair was, there would be no ideal Platonic form of the chair floating out there somewhere. In that sense, I differ from the idealists’ characterization of essences as “immaterial”. Rather, an essence always characterizes a material entity or process performed by material entities.

Qualia

Qualia are an individual’s subjective, conscious experiences of reality – for instance, how an individual perceives the color red or the sound of a note played on an instrument. But qualia, too, have a material grounding. As a physicalist, I understand qualia to be the result of physical processes within the body and brain that generate certain sensory perceptions of the world. It follows that different qualia can only be generated if one’s organism has different physical components.

A bat, a fly, or a whale would certainly experience the same external reality differently from a human. Most humans (the ones whose sense organs are not damaged or characterized by genetic defects) have the same essential perceptual structures and so, if placed within the exact same vantage point relative to an object, would perceive it in the same way (with regard to what appears before their senses). After that, of course, what they choose to focus on with their minds and how they choose to interpret what they see (in terms of opinions, associations, decisions regarding what to do next) could differ greatly. The physical perception is objective, but the interpretation of that perception is subjective. But by emulating the sensory organs of another organism (even a bat or a fly), it should be possible to perceive what that organism perceives. I delve into this principle in some detail in Chapter XII of A Rational Cosmology: “The Objectivity of Consciousness”.

Importance of Ontological Realism to Life, Flourishing, and Human Agency

Some opponents of ontological realism might classify it as a “naïve” perspective and claim that those who see physical reality as primary are inappropriately assigning it “ontological privilege”. On the contrary, I strongly hold that this world is the one and that, certainly, events that happen in this world are ontologically privileged for having happened – as opposed to the uncountably many possibilities for what might have happened but did not. Moreover, I see this recognition as an essential starting point for the endeavor which is really at the heart of individual liberty, life extension, transhumanism, and, more generally, a consistent vision of humanism and morality: the preservation of the individual – of all individuals who have not committed irreparable wrongs – from physical demise.

I am not an adherent of the “many worlds” interpretation of quantum mechanics, which some may posit in opposition to my view of the primacy of the single physical reality which we directly experience and inhabit. Indeed, to me, it does not appear that quantum mechanics has a valid philosophical interpretation at all (at least not until some extremely rational and patient philosopher delves into it and tries to puzzle it out); rather, it is a set of equations that is reasonably predictive of the behavior of subatomic particles (sometimes) through a series of probabilistic models. Perhaps in part due to my work in another highly probability-driven area – actuarial science – my experience informs me that probabilistic models are at best only useful approximations of phenomena that may not yet be accessible to us in other ways, and a substantial fraction of the time the models are wildly wrong anyway. As for the very concept of randomness itself, it is a useful epistemological idea, but not a valid metaphysical one, as I explain in my essay “Putting Randomness in Its Place“.

In my view, the past is irreversible, and it happened in the one particular way it happened. The future is full of potential, because it has not happened yet, and the emergent property of human volition enables it to happen in a multitude of ways, depending on the paths we choose. In a poetic sense, it could be said that many worlds unfold before us, but with every passing moment, we pick one of them and that world becomes the one irreversibly, while the others are not retained anywhere. Not only is this understanding a necessary prerequisite for the concept of moral responsibility (our actions have consequences in bringing about certain outcomes, for which we can be credited or faulted, rewarded or punished), but it is also necessary as a foundation for the life-extension premise itself.

If there were infinitely many possible universes, where each of us could have died or not died at every possible instant, then in some of those hypothetical universes, we would have all already been beneficiaries of indefinite life extension. Imagine a universe where humanity was lucky and avoided all of the wars, tyrannies, epidemics, and superstitions that plagued our history and, as a result, was able to progress so rapidly that indefinite longevity would have been already known to the ancient Greeks! This would make for fascinating fiction, and I readily admit to enjoying the occasional retrospective “What if?” contemplation – e.g., what if the Jacobins had not taken over during the French Revolution, or what if Otto von Bismarck had never come to power in Germany, or what if the attacks of September 11, 2001 (a major setback for human progress, largely due to the reactionary violation of civil liberties by Western governments) had never happened? Unfortunately, from an ontological perspective, I do not have that luxury of rewriting the past.  As for the future, it can only be written through actions that affect the physical world, but any tools we can create to help us do this would be welcome.

This is certainly not the best of all possible worlds (a point amply demonstrated in one of my favorite works, Voltaire’s Candide), but it is the world we find ourselves in, through a variety of historical accidents, path-dependencies, and our own prior choices and their foreseen and unforeseen repercussions. But this is indeed our starting point when it comes to any future action, and the choice each of us ultimately faces is whether (i) to become a passive victim of the “larger forces” in this world (to conform or “adapt”, as many people like to call it), (ii) to create an alternate world using imagination and subjective experience only, or (iii) to physically alter this world to fit the parameters of a more just, happy, safe, and prosperous existence – a task to which only we are suited (since there is no cosmic justice or higher power). It should be clear by now that I strongly favor the third option. We should, through our physical deeds, harness the laws of nature to create the world we would wish to inhabit.

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“Death is Wrong” Free PDF Files Available for Download – Post by G. Stolyarov II

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Categories: Announcements, Art, Education, Philosophy, Science, Technology, Transhumanism, Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

The New Renaissance Hat
G. Stolyarov II
August 11, 2014
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Now that my campaign to spread over 1,000 Death is Wrong books to children has succeeded, I have asked myself what I could do to spread the book and its message even further. In an effort to increase the readership of the book, I have made the Second Edition available for FREE download as a PDF file. Perhaps, in this way, the book could reach tens or even hundreds of thousands of readers. Thus far, PDF versions are available in English, Russian, and Spanish.

PDF URL - Death is Wrong – English Edition: http://rationalargumentator.com/Death_is_Wrong_Second_Edition_Full.pdf

PDF URL - «Смерть неправильна!» – Russian Edition (translated by Marcus Baylin): http://rationalargumentator.com/Death_is_Wrong_Russian_Edition_Full.pdf

PDF URL – La muerte está mal - Spanish Edition (translated by Néstor Duno): http://rationalargumentator.com/Death_is_Wrong_Spanish_Edition.pdf

If you have read the PDF version and enjoyed it, consider purchasing the paperback version on Amazon for yourself, a friend, or a child, and/or consider making a PayPal or cryptocurrency donation via the sidebar on The Rational Argumentator.

Death is Wrong - by Gennady Stolyarov II, Illustrated by Wendy Stolyarov

Death is Wrong – by Gennady Stolyarov II, Illustrated by Wendy Stolyarov

Click on the cover for a high-resolution image that you can download, save, and distribute.

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Triumphant Endeavor, Op. 19 (2003) – Musical Composition and Video by G. Stolyarov II

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The New Renaissance Hat
G. Stolyarov II
August 10, 2014
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This radiant composition by Mr. Stolyarov, composed in Spring 2003 in a mid-19th-century style, seeks to reflect the nature of struggle, persistence, and triumph in the face of adversity. The melody alternates between leisurely and intense passages, illustrating both the easy and the difficult aspects of any major undertaking.

Download the MP3 file of this composition here.
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See the index of Mr. Stolyarov’s compositions, all available for free download, here.
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The artwork is Mr. Stolyarov’s Abstract Orderism Fractal VI – Dome Fractal, available for download here and here.
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Remember to LIKE, FAVORITE, and SHARE this video in order to spread rational high culture to others.

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US Sanctions on Russia May Sink the Dollar – Article by Ron Paul

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The New Renaissance Hat
Ron Paul
August 10, 2014
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The US government’s decision to apply more sanctions on Russia is a grave mistake and will only escalate an already tense situation, ultimately harming the US economy itself. While the effect of sanctions on the dollar may not be appreciated in the short term, in the long run these sanctions are just another step toward the dollar’s eventual demise as the world’s reserve currency.

Not only is the US sanctioning Russian banks and companies, but it also is trying to strong-arm European banks into enacting harsh sanctions against Russia as well. Given the amount of business that European banks do with Russia, European sanctions could hurt Europe at least as much as Russia. At the same time the US expects cooperation from European banks, it is also prosecuting those same banks and fining them billions of dollars for violating existing US sanctions. It is not difficult to imagine that European banks will increasingly become fed up with having to act as the US government’s unpaid policemen, while having to pay billions of dollars in fines every time they engage in business that Washington doesn’t like.

European banks are already cutting ties with American citizens and businesses due to the stringent compliance required by recently-passed laws such as FATCA (Foreign Account Tax Compliance Act). In the IRS’s quest to suck in as much tax dollars as possible from around the world, the agency has made Americans into the pariahs of the international financial system. As the burdens the US government places on European banks grow heavier, it should be expected that more and more European banks will reduce their exposure to the United States and to the dollar, eventually leaving the US isolated. Attempting to isolate Russia, the US actually isolates itself.

Another effect of sanctions is that Russia will grow closer to its BRICS (Brazil/Russia/India/China/South Africa) allies. These countries count over 40 percent of the world’s population, have a combined economic output almost equal to the US and EU, and have significant natural resources at their disposal. Russia is one of the world’s largest oil producers and supplies Europe with a large percent of its natural gas. Brazil has the second-largest industrial sector in the Americas and is the world’s largest exporter of ethanol. China is rich in mineral resources and is the world’s largest food producer. Already Russia and China are signing agreements to conduct their bilateral trade with their own national currencies rather than with the dollar, a trend which, if it spreads, will continue to erode the dollar’s position in international trade. Perhaps more importantly, China, Russia, and South Africa together produce nearly 40 percent of the world’s gold, which could play a role if the BRICS countries decide to establish a gold-backed currency to challenge the dollar.

US policymakers fail to realize that the United States is not the global hegemon it was after World War II. They fail to understand that their overbearing actions toward other countries, even those considered friends, have severely eroded any good will that might previously have existed. And they fail to appreciate that more than 70 years of devaluing the dollar has put the rest of the world on edge. There is a reason the euro was created, a reason that China is moving to internationalize its currency, and a reason that other countries around the world seek to negotiate monetary and trade compacts. The rest of the world is tired of subsidizing the United States government’s enormous debts, and tired of producing and exporting trillions of dollars of goods to the US, only to receive increasingly worthless dollars in return.

The US government has always relied on the cooperation of other countries to maintain the dollar’s preeminent position. But international patience is wearing thin, especially as the carrot-and-stick approach of recent decades has become all stick and no carrot. If President Obama and his successors continue with their heavy-handed approach of levying sanctions against every country that does something US policymakers don’t like, it will only lead to more countries shunning the dollar and accelerating the dollar’s slide into irrelevance.

Ron Paul, MD, is a former three-time Republican candidate for U. S. President and Congressman from Texas.

This article is reprinted with permission from the Ron Paul Institute for Peace and Prosperity.

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Confusing Capitalism with Fractional-Reserve Banking – Article by Frank Hollenbeck

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The New Renaissance Hat
Frank Hollenbeck
August 10, 2014
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Today, capitalism is blamed for our current disastrous economic and financial situation and a history of incessant booms and busts. Support for capitalism is eroding worldwide. In a recent global poll, 25 percent (up 2 percent from 2009) of respondents viewed free enterprise as “fatally flawed and needs to be replaced.” The number of Spaniards who hold this view increased from 29 percent in 2009 to 42 percent, the highest amongst those polled. In Indonesia, the percentage went from 17 percent to 32 percent.

Most, if not all, booms and busts originate with excess credit creation from the financial sector. These respondents, incorrectly, assume that this financial system structured on fractural reserve banking is an integral part of capitalism. It isn’t. It is fraud and a violation of property rights, and should be treated as such.

In the past, we had deposit banks and loan banks. If you put your money in a deposit bank, the money was there to pay your rent and food expenses. It was safe. Loan banking was risky. You provided money to a loan bank knowing funds would be tied up for a period of time and that you were taking a risk of never seeing this money again. For this, you received interest to compensate for the risk taken and the value of time preference. Back then, bankers who took a deposit and turned it into a loan took the risk of shortly hanging from the town’s large oak tree.

During the early part of the nineteenth century, the deposit function and loan function were merged into a new entity called a commercial bank. Of course, very quickly these new commercial banks realized they could dip into deposits, essentially committing fraud, as a source of funding for loans. Governments soon realized that such fraudulent activity was a great way to finance government expenditures, and passed laws making this fraud legal. A key interpretation of law in the United Kingdom, Foley v. Hill, set precedence in the financial world for banking laws to follow:

Foley v. Hill and Others, 1848:

Money, when paid into a bank, ceases altogether to be the money of the principal; it is then the money of the banker, who is bound to an equivalent by paying a similar sum to that deposited with him when he is asked for it. … The money placed in the custody of a banker is, to all intents and purposes, the money of the banker, to do with it as he pleases; he is guilty of no breach of trust in employing it; he is not answerable to the principal if he puts it into jeopardy, if he engages in a hazardous speculation; he is not bound to keep it or deal with it as the property of his principal; but he is, of course, answerable for the amount, because he has contracted, having received that money, to repay to the principal, when demanded, a sum equivalent to that paid into his hands. [1]

In other words, when you put your money in a bank it is no longer your money. The bank can do anything it wants with it. It can go to the casino and play roulette. It is not fraud legally, and the only requirement for the bank is to run a Ponzi scheme, giving you the money deposited by someone else if they lost your money and you happen to come back asking for your money. This legalization of fraud is essentially one of the main reasons no one went to jail after the debacle of 2008.

The primary cause of the financial panics during the nineteenth century was this fraudulent nature of fractional reserve banking. It allowed banks to create excessive credit growth which led to boom and bust cycles. If credit, instead, grew as fast as slow moving savings, booms and bust cycles would be a thing of the past.

Critics of the gold standard, (namely, Krugman, et al.), usually point to these cycles as proof that it failed as a monetary system. They are confusing causation with association. The gold standard did not cause these financial panics. The real cause was fractional reserve banking that was grafted onto the gold standard. The gold standard, on the contrary, actually greatly limited the severity of these crises, by limiting the size of the money multiplier.

This is why in the early days of banking in the US, some wildcat bankers would establish themselves in the most inaccessible locations. This was to ensure that few would actually come and convert claims for gold into actual gold since banks had created claims that far exceeded the actual gold in their vaults. And, if by chance a depositor tried to convert his claims into gold, they would be treated as thieves, as though they were stealing the bank’s property by asking for their gold back.

The Federal Reserve System was created following the panics of 1903 and 1907 to counterbalance the negative impact of fractional reserve banking. One hundred years after its creation, the Fed can only be given a failing grade. Money is no longer a store of value, and the world has experienced two of its worst financial crises. Instead of a counterbalance, the central bank has fed and expanded the size of the beast. This was to be expected.

That global poll on capitalism also found that almost half (48 percent) of respondents felt that the problems of capitalism could be resolved with added regulations and reform. Janet Yellen also holds this view, and that regulation, not interest rates, should be the main tool to avoid another costly boom and bust in global finance. This is extremely naïve. We already have more compliance officers in banks than loan officers. Recent banking legislation, Dodd-Frank, and the Vickers and Liikanen reports will probably make the situation even worse. Banks will always be able to use new technologies and new financial instruments to stay one step ahead of the regulators. We continue to put bandages on a system that is rotten to the core. Banking in its current form is not capitalism. It is fraud and crony capitalism, kept afloat by ever-more desperate government interventions. It should be dismantled. Under a system of 100 percent reserves, loan banks (100 percent equity-financed investment trusts) would be like any other business and would not need any more regulation than that of the makers of potato chips.

Notes

[1] Quoted in Murray Rothbard’s, The Mystery of Banking (Auburn, AL: Mises Institute, 2008), p. 92.

Frank Hollenbeck teaches finance and economics at the International University of Geneva. He has previously held positions as a Senior Economist at the State Department, Chief Economist at Caterpillar Overseas, and as an Associate Director of a Swiss private bank. See Frank Hollenbeck’s article archives.

This article was published on Mises.org and may be freely distributed, subject to a Creative Commons Attribution United States License, which requires that credit be given to the author.

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