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Bitcoin Is All that Stands between My Family and Starvation – Article by Anonymous Venezuelan

Bitcoin Is All that Stands between My Family and Starvation – Article by Anonymous Venezuelan

The New Renaissance Hat
Anonymous Venezuelan
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I am writing this post in response to comments I get from people when I try and explain what Bitcoin is. Uneducated people have told me countless times that bitcoins are only used by criminals. I want to debunk that myth and explain how the real potential for bitcoins is so much bigger than the black market can ever be.

Bitcoin is literally saving my family from hunger and giving them the financial freedom to immigrate in the near future. My parents and sister live in Venezuela. A lot of you might not know exactly what’s happening there so here are the cliff notes.

  1. An incredibly incompetent socialist government took power.
  2. They created strict currency controls that made it impossible for people to buy goods in anything other than their local currency. If you owned a business and needed to import something from overseas you needed the government’s approval to exchange the local currency to US dollars
  3. This made running a business almost impossible. To operate you had to buy US dollars on a black market or bribe a government official to exchange currency.
  4. When oil prices dropped the government quickly ran out of money causing an expected inflation of 1800% in 2017.

For more about what’s going on in Venezuela check our www.reddit.com/r/arepas

Things started to get really bad in Venezuela around 2014. My father owned at the time a successful air conditioning repair business but he knew things were about to take a turn for the worse. We came up with a plan to open a US bank account and convert bolívars (Venezuelan currency) into US dollars so we would be protected from inflation. We quickly ran into logistical problems, physically getting and safely transporting the money out of the country.

Caracas is one of the most violent cities in the world. Carjackings are common and people are killed for their cell phones. The airport police are corrupt and just as likely to rob you, and the money can’t be put in the local bank because you aren’t allowed to have dollars.

I’m 2014 Bitcoin was a new technology so we were very skeptical about it but we didn’t have any other options.

Fast forward to 2017. The economy is Venezuela is dead. My father lost his air conditioning business and people like our neighbors that were middle and upper class a few years ago can’t afford food. Thanks to the rising price of Bitcoin and its relative stability (to the Venezuelan economy), my family is part of a very small fortunate minority that can afford to help feed their community and also potentially immigrate to another country.

Now consider how big the Venezuelan economy is and that other countries like Brazil and Argentina are also experiencing similar problems. If citizens converted only a small amount of their savings into bitcoins this would represent an incredible amount of money.

Bitcoin can give anyone the ability to trade freely and protect themselves financially against corrupt and incompetent governments. In a world of 6 billion people, most of whom have no access or are ineligible for basic banking services, and an increasing number of governments opposing free speech and basic human rights, Bitcoin might not be the perfect hero we want but it’s what we need.

So in summary, Bitcoin is used by criminals the same way cash is used by criminals. If you take one step back you’ll realize that the possible legitimate uses for Bitcoin are far greater than the black market can ever be.

Reprinted from Reddit and the Foundation for Economic Education.

The author of this essay requested to remain anonymous.

The Federal Reserve Is, and Always Has Been, Politicized – Article by Ron Paul

The Federal Reserve Is, and Always Has Been, Politicized – Article by Ron Paul

The New Renaissance HatRon Paul
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Audit the Fed recently took a step closer to becoming law when it was favorably reported by the House Committee on Oversight and Government Reform. This means the House could vote on the bill at any time. The bill passed by voice vote without any objections, although Fed defenders did launch hysterical attacks on the bill during the debate as well as at a hearing on the bill the previous week.

One representative claimed that auditing the Fed would result in rising interest rates, a stock market crash, a decline in the dollar’s value, and a complete loss of confidence in the US economy. Those who understand economics know that all of this is actually what awaits America unless we change our monetary policy. Passing the audit bill is the vital first step in that process, since an audit can provide Congress a road map to changing the fiat currency system.

Another charge leveled by the Fed’s defenders is that subjecting the Fed to an audit would make the Fed subject to political pressure. There are two problems with this argument. First, nothing in the audit bill gives Congress or the president any new authority to interfere in the Federal Reserve’s operations. Second, and most importantly, the Federal Reserve has a long history of giving in to presidential pressure for an “accommodative” monetary policy.

The most notorious example of Fed chairmen tailoring monetary policy to fit the demands of a president is Nixon-era Federal Reserve Chair Arthur Burns. Burns and Nixon may be an extreme example — after all no other president was caught on tape joking with the Fed chair about Fed independence, but every president has tried to influence the Fed with varying degrees of success. For instance, Lyndon Johnson summoned the Fed chair to the White House to berate him for not tailoring monetary policy to support Johnson’s guns-and-butter policies.

Federal Reserve chairmen have also used their power to shape presidential economic policy. According to Maestro, Bob Woodward’s biography of Alan Greenspan, Bill Clinton once told Al Gore that Greenspan was a “man we can deal with,” while Treasury Secretary Lloyd Bentsen claimed the Clinton administration and Greenspan’s Fed had a “gentleman’s agreement” regarding the Fed’s support for the administration’s economic policies.

The Federal Reserve has also worked to influence the legislative branch. In the 1970s, the Fed organized a campaign by major banks and financial institutions to defeat a prior audit bill. The banks and other institutions who worked to keep the Fed’s operations a secret are not only under the Fed’s regulatory jurisdiction, but are some of the major beneficiaries of the current monetary system.

There can be no doubt that, as the audit bill advances through the legislative process, the Fed and its allies will ramp up both public and behind-the-scenes efforts to kill the bill. Can anyone dismiss the possibility that Janet Yellen will attempt to “persuade” Donald Trump to drop his support for Audit the Fed in exchange for an “accommodative” monetary policy that supports the administration’s proposed spending on overseas militarism and domestic infrastructure?

While auditing the Fed is supported by the vast majority of Americans, it is opposed by powerful members of the financial elite and the deep state. Therefore, those of us seeking to change our national monetary policy must redouble our efforts to force Congress to put America on a path to liberty, peace, and prosperity by auditing, then ending, the Fed.

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.

Arizona Challenges the Fed’s Money Monopoly – Article by Ron Paul

Arizona Challenges the Fed’s Money Monopoly – Article by Ron Paul

The New Renaissance HatRon Paul
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History shows that, if individuals have the freedom to choose what to use as money, they will likely opt for gold or silver.

Of course, modern politicians and their Keynesian enablers despise the gold or silver standard. This is because linking a currency to a precious metal limits the ability of central banks to finance the growth of the welfare-warfare state via the inflation tax. This forces politicians to finance big government much more with direct means of taxation.

Despite the hostility toward gold from modern politicians, gold played a role in US monetary policy for sixty years after the creation of the Federal Reserve. Then, in 1971, as concerns over the US government’s increasing deficits led many foreign governments to convert their holdings of US dollars to gold, President Nixon closed the gold window, creating America’s first purely fiat currency.

America’s 46-year experiment in fiat currency has gone exactly as followers of the Austrian school predicted: a continuing decline in the dollar’s purchasing power accompanied by a decline in the standard of living of middle- and working-class Americans, a series of Federal Reserve-created booms followed by increasingly severe busts, and an explosive growth in federal-government spending. Federal Reserve policies are also behind much of the increase in income inequality.

Since the 2008 Fed-created economic meltdown, more Americans have become aware of the Federal Reserve’s responsibility for America’s economic problems. This growing anti-Fed sentiment is one of the key factors behind the liberty movement’s growth and represents the most serious challenge to the Fed’s legitimacy in its history. This movement has made “Audit the Fed” into a major national issue that is now closer than ever to being signed into law.

Audit the Fed is not the only focus of the growing anti-Fed movement. For example, this Wednesday the Arizona Senate Finance and Rules Committees will consider legislation (HB 2014) officially defining gold, silver, and other precious metals as legal tender. The bill also exempts transactions in precious metals from state capital-gains taxes, thus ensuring that people are not punished by the taxman for rejecting Federal Reserve notes in favor of gold or silver. Since inflation increases the value of precious metals, these taxes give the federal government one more way to profit from the Federal Reserve’s currency debasement.

HB 2014 is a very important and timely piece of legislation. The Federal Reserve’s failure to reignite the economy with record-low interest rates since the last crash is a sign that we may soon see the dollar’s collapse. It is therefore imperative that the law protect people’s right to use alternatives to what may soon be virtually worthless Federal Reserve notes.

Passage of HB 2014 would also send a message to Congress and the Trump administration that the anti-Fed movement is growing in influence. Thus, passage of this bill will not just strengthen movements in other states to pass similar legislation; it will also help build support for the Audit the Fed bill and legislation repealing federal legal tender laws.

This Wednesday I will be in Arizona to help rally support for HB 2014, speaking on behalf of the bill before the Arizona Senate Finance Committee at 9:00 a.m. I will also be speaking at a rally at noon at the Arizona state capitol. I hope every supporter of sound money in the Phoenix area joins me to show their support for ending the Fed’s money monopoly.

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.

Alan Greenspan Admits Ron Paul Was Right About Gold – Article by Ryan McMaken

Alan Greenspan Admits Ron Paul Was Right About Gold – Article by Ryan McMaken

The New Renaissance Hat
Ryan McMaken
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In the next issue of The Austrian, David Gordon reviews Sebatian Mallaby’s new book, The Man Who Knew, about the career of Alan Greenspan. Mallaby points out that prior to his career at the Fed, Greenspan exhibited a keen understanding of the gold standard and how free markets work. In spite of this contradiction, Mallaby takes a rather benign view toward Greenspan.

However, in his review, Gordon asks the obvious question: If Greenspan knew all this so well, isn’t it all the more worthy of condemnation that Greenspan then abandoned these ideas so readily to advance his career?

Perhaps not surprisingly, now that his career at the Fed has ended, Old Greenspan — the one who defends free markets — has now returned.

This reversion to his former self has been going on for several years, and Greenspan reiterates this fact yet again in a recent interview with Gold Investor magazine. Greenspan is now a fount of sound historical information about the historical gold standard:

I view gold as the primary global currency. It is the only currency, along with silver, that does not require a counterparty signature. Gold, however, has always been far more valuable per ounce than silver. No one refuses gold as payment to discharge an obligation. Credit instruments and fiat currency depend on the credit worthiness of a counterparty. Gold, along with silver, is one of the only currencies that has an intrinsic value. It has always been that way. No one questions its value, and it has always been a valuable commodity, first coined in Asia Minor in 600 BC.

The gold standard was operating at its peak in the late 19th and early 20th centuries, a period of extraordinary global prosperity, characterised by firming productivity growth and very little inflation.

But today, there is a widespread view that the 19th century gold standard didn’t work. I think that’s like wearing the wrong size shoes and saying the shoes are uncomfortable! It wasn’t the gold standard that failed; it was politics. World War I disabled the fixed exchange rate parities and no country wanted to be exposed to the humiliation of having a lesser exchange rate against the US dollar than itenjoyed in 1913.

Britain, for example, chose to return to the gold standard in 1925 at the same exchange rate it had in 1913 relative to the US dollar (US$4.86 per pound sterling). That was a monumental error by Winston Churchill, then Chancellor of the Exchequer. It induced a severe deflation for Britain in the late 1920s, and the Bank of England had to default in 1931. It wasn’t the gold standard that wasn’t functioning; it was these pre-war parities that didn’t work. All wanted to return to pre-war exchange rate parities, which, given the different degree of war and economic destruction from country to country, rendered this desire, in general, wholly unrealistic.

Today, going back on to the gold standard would be perceived as an act of desperation. But if the gold standard were in place today we would not have reached the situation in which we now find ourselves.

Greenspan then says nice things about Paul Volcker’s high-interest-rate policy:

Paul Volcker was brought in as chairman of the Federal Reserve, and he raised the Federal Fund rate to 20% to stem the erosion [of the dollar’s value during the inflationary 1970s]. It was a very destabilising period and by far the most effective monetary policy in the history of the Federal Reserve. I hope that we don’t have to repeat that exercise to stabilise the system. But it remains an open question.

Ultimately, though, Greenspan claims that central-bank policy can be employed to largely imitate a gold standard:

When I was Chair of the Federal Reserve I used to testify before US Congressman Ron Paul, who was a very strong advocate of gold. We had some interesting discussions. I told him that US monetary policy tried to follow signals that a gold standard would have created. That is sound monetary policy even with a fiat currency. In that regard, I told him that even if we had gone back to the gold standard, policy would not have changed all that much.

This is a rather strange claim, however. It is impossible to know what signals a gold standard “would have” created in the absence of the current system of fiat currencies. It is, of course, impossible to recreate the global economy under a gold standard in an economy and guess how the system might be imitated in real life. This final explanation appears to be more the sort of thing that Greenspan tells himself so he can reconcile his behavior at the fed with what he knows about gold and markets.

Nor does this really address Ron Paul’s concerns, expressed for years, toward Greenspan and his successors. Even if monetary policymakers were attempting to somehow replicate a gold-standard environment, Paul’s criticism was always that the outcome of the current monetary regime can be shown to be dangerous for a variety of reasons. Among these problems are enormous debt loads and stagnating real incomes due to inflation. Moreover, thanks to Cantillon effects, monetarily-induced inflation has the worst impact on lower-income households.

Even Greenspan admits this is the case with debt: “We would never have reached this position of extreme indebtedness were we on the gold standard, because the gold standard is a way of ensuring that fiscal policy never gets out of line.”

Certainly, debt loads have taken off since Nixon closed the gold window in 1971, breaking the last link with gold:

Ryan W. McMaken is the editor of Mises Daily and The Free Market. He has degrees in economics and political science from the University of Colorado, and was the economist for the Colorado Division of Housing from 2009 to 2014. He is the author of Commie Cowboys: The Bourgeoisie and the Nation-State in the Western Genre. 

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.

To Really ‘Make America Great Again,’ End the Fed! – Article by Ron Paul

To Really ‘Make America Great Again,’ End the Fed! – Article by Ron Paul

The New Renaissance HatRon Paul
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Former Dallas Federal Reserve Bank President Richard Fisher recently gave a speech identifying the Federal Reserve’s easy-money/low-interest-rate policies as a source of the public anger that propelled Donald Trump into the White House. Mr. Fisher is certainly correct that the Fed’s policies have “skewered” the middle class. However, the problem is not specific Fed policies, but the very system of fiat currency managed by a secretive central bank.

Federal Reserve-generated increases in money supply cause economic inequality. This is because, when the Fed acts to increase the money supply, well-to-do investors and other crony capitalists are the first recipients of the new money. These economic elites enjoy an increase in purchasing power before the Fed’s inflationary policies lead to mass price increases. This gives them a boost in their standard of living.

By the time the increased money supply trickles down to middle- and working-class Americans, the economy is already beset by inflation. So most average Americans see their standard of living decline as a result of Fed-engendered money supply increases.

Some Fed defenders claim that inflation doesn’t negatively affect anyone’s standard of living because price increases are matched by wage increases. This claim ignores the fact that the effects of the Fed’s actions depend on how individuals react to the Fed’s actions.

Historically, an increase in money supply does not just cause a general rise in prices. It also causes money to flow into specific sectors, creating a bubble that provides investors and workers in those areas a (temporary) increase in their incomes. Meanwhile, workers and investors in sectors not affected by the Fed-generated boom will still see a decline in their purchasing power and thus their standard of living.

Adoption of a “rules-based” monetary policy will not eliminate the problem of Fed-created bubbles, booms, and busts, since Congress cannot set a rule dictating how individuals react to Fed policies. The only way to eliminate the boom-and-bust cycle is to remove the Fed’s power to increase the money supply and manipulate interest rates.

Because the Fed’s actions distort the view of economic conditions among investors, businesses, and workers, the booms created by the Fed are unsustainable. Eventually reality sets in, the bubble bursts, and the economy falls into recession.

When the crash occurs the best thing for Congress and the Fed to do is allow the recession to run its course. Recessions are the economy’s way of cleaning out the Fed-created distortions. Of course, Congress and the Fed refuse to do that. Instead, they begin the whole business cycle over again with another round of money creation, increased stimulus spending, and corporate bailouts.

Some progressive economists acknowledge how the Fed causes economic inequality and harms average Americans. These progressives support perpetual low interest rates and money creation. These so-called working class champions ignore how the very act of money creation causes economic inequality. Longer periods of easy money also mean longer, and more painful, recessions.

President-elect Donald Trump has acknowledged that, while his business benefits from lower interest rates, the Fed’s policies hurt most Americans. During the campaign, Mr. Trump also promised to make Audit the Fed part of his first 100 days agenda. Unfortunately, since the election, President-elect Trump has not made any statements regarding monetary policy or the Audit the Fed legislation. Those of us who understand that changing monetary policy is the key to making America great again must redouble our efforts to convince Congress and the new president to audit, then end, the Federal Reserve.

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.

The Fed Plans for the Next Crisis – Article by Ron Paul

The Fed Plans for the Next Crisis – Article by Ron Paul

The New Renaissance HatRon Paul
******************************

In her recent address at the Jackson Hole monetary policy conference, Federal Reserve Chair Janet Yellen suggested that the Federal Reserve would raise interest rates by the end of the year. Markets reacted favorably to Yellen’s suggested rate increase. This is surprising, as, except for one small increase last year, the Federal Reserve has not followed through on the numerous suggestions of rate increases that Yellen and other Fed officials have made over the past several years.

Much more significant than Yellen’s latest suggestion of a rate increase was her call for the Fed to think outside the box in developing responses to the next financial crisis. One of the outside-the-box ideas suggested by Yellen is increasing the Fed’s ability to intervene in markets by purchasing assets of private companies. Yellen also mentioned that the Fed could modify its inflation target.

Increasing the Federal Reserve’s ability to purchase private assets will negatively impact economic growth and consumers’ well-being. This is because the Fed will use this power to keep failing companies alive, thus preventing the companies’ assets from being used to produce a good or service more highly valued by consumers.

Investors may seek out companies whose assets have been purchased by the Federal Reserve, since it is likely that Congress and federal regulators would treat these companies as “too big to fail.” Federal Reserve ownership of private companies could also strengthen the movement to force businesses to base their decisions on political, rather than economic, considerations.

Yellen’s suggestion of modifying the Fed’s inflation target means that the Fed would increase the inflation tax just when Americans are trying to cope with a major recession or even a depression. The inflation tax is the most insidious of all taxes because it is both hidden and regressive.

The failure of the Federal Reserve’s eight-year spree of money creation via quantitative easing and historically low interest rates to reflate the bubble economy suggests that the fiat currency system may soon be coming to an end. Yellen’s outside-the-box proposals will only hasten that collapse.

The collapse of the fiat system will not only cause a major economic crisis, but also the collapse of the welfare-warfare state. Yet, Congress not only refuses to consider meaningful spending cuts, it will not even pass legislation to audit the Fed.

Passing Audit the Fed would allow the American people to know the full truth about the Federal Reserve’s conduct of monetary policy, including the complete details of the Fed’s plans to respond to the next economic crash. An audit will also likely uncover some very interesting details regarding the Federal Reserve’s dealings with foreign central banks.

The large number of Americans embracing authoritarianism — whether of the left or right-wing variety — is a sign of mass discontent with the current system. There is a great danger that, as the economic situation worsens, there will be an increase in violence and growing restrictions on liberty. However, public discontent also presents a great opportunity for those who understand free-market economics to show our fellow citizens that our problems are not caused by immigrants, imports, or the one percent, but by the Federal Reserve.

Politicians will never restore sound money or limited government unless forced to do so by either an economic crisis or a shift in public option. It is up to us who know the truth to make sure the welfare-warfare state and the system of fiat money ends because the people have demanded it, not because a crisis left Congress with no other choice.

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.

Witness to the End of Soviet Power: Twenty-Five Years Ago – Article by Richard M. Ebeling

Witness to the End of Soviet Power: Twenty-Five Years Ago – Article by Richard M. Ebeling

The New Renaissance HatRichard M. Ebeling
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Twenty-five years ago, on August 22, 1991, I stood amid a vast cheering crowd of tens of thousands of people outside the Russian parliament building in Moscow, the capital of the Soviet Union. They were celebrating the failure by diehard Soviet leaders to undertake a political and military coup d’état meant to maintain dictatorial communist rule in the Union of Soviet Socialist Republics.

The Soviet regime had ruled Russia and the other 14 component republics of the U.S.S.R. for nearly 75 years, since the Bolshevik Revolution in November 1917 led by Vladimir Lenin and his communist cadre of Marxist followers. During that almost three-quarters of a century, first under Lenin and especially Josef Stalin and then their successors, historians have estimated that upwards of 64 million people – innocent, unarmed men, women and children – died at the hands of the Soviet regime in the name of building the “bright, beautiful future” of socialism.

Millions Dead

The forced collectivization of the land under Stalin in the early 1930s, alone, is calculated to have cost the lives of nine to twelve million Russian and Ukrainian peasants and their families who resisted the loss of their private farms and being forced into state collective farms that replaced them.

Some were simply shot; others were tortured to death or sent to die as slave labor in the concentration and labor camps in Siberia or Soviet Central Asia known as the GULAG. Millions were slowly starved to death by a government-created famine designed to force submission to the central planning dictates of Stalin and his henchmen.

Millions of others were rounded up and sent off to those prison and labor camps as part of the central plan for forced industrial and mineral mining development of the far reaches of the Soviet Union. In the 1930s and 1940s, Stalin’s central plans would include quotas for how many of the “enemies of the people” were to be arrested and executed in every city, town and district in the Soviet Union. In addition, there were quotas for how many were to be rounded up as replacements for those who had already died in the GULAG working in the vast wastelands of Siberia, northern European Russia and Central Asia.

By the 1960s, 1970s, and early 1980s the Soviet system had become increasingly corrupt, stagnant, and decrepit under a succession of aging Communist Party leaders whose only purpose was to hold on to power and their special privileges. In 1986 a much younger man, Mikhail Gorbachev, who had worked his way up in the Party hierarchy was appointed to the leading position of General Secretary of the Communist Party of the U.S.S.R.

Gorbachev’s Attempt to Save Socialism 

Gorbachev believed that the Soviet Union had taken several serious wrong turns in the past. But he was not an opponent of socialism or its Marxist-Leninist foundations. He wanted a new “socialism-with-a-human-face.” His goal was a “kinder and gentler” communist ideology, so to speak. He truly believed that the Soviet Union could be saved, and with it a more humane collectivist alternative to Western capitalism.

To achieve this end, Gorbachev had introduced to two reform agendas: First, perestroika, a series of economic changes meant to admit the mistakes of heavy-handed central planning. State enterprise managers were to be more accountable, small private businesses would be permitted and fostered, and Soviet companies would be allowed to form joint ventures with selected Western corporations. Flexibility and adaptability would create a new and better socialist economy.

Second, glasnost, political “openness,” under which the political follies of the past would be admitted and the formerly “blank pages” of Soviet history – especially about the “crimes of Stalin” – would be filled in. Greater historical and political honesty, it was said, would revive the moribund Soviet ideology and renew the Soviet people’s enthusiastic support for the reformed and redesigned bright socialist future.

However, over time the more hardline and “conservative” members of the Soviet leadership considered all such reforms as opening a Pandora’s Box of uncontrollable forces that would undermine the Soviet system. They had already seen this happen in the outer ring of the Soviet Empire in Eastern Europe.

The Beginning of the End in Eastern Europe

In 1989 Gorbachev had stood by as the Berlin Wall, the symbol of Soviet imperial power in the heart of Europe, had come tumbling down, and the Soviet “captive nations” of Eastern Europe – East Germany, Poland, Czechoslovakia, Hungary, Romania and Bulgaria – that Stalin had claimed as conquered booty at the end of the Second World War, began to free themselves from communist control and Soviet domination. (See my article, “The Berlin Wall and the Spirit of Freedom.”)

The Soviet hardliners were now convinced that a new political treaty that Gorbachev was planning to sign with Boris Yeltsin, president of the Russian Soviet Federation Republic and Nursultan Nazarbayev, president of the Soviet republic of Kazakhstan, would mean the end of the Soviet Union, itself.

Already, the small Baltic republics of Estonia, Latvia, and Lithuania were reasserting the national independence they had lost in 1939-1940, as a result of Stalin and Hitler’s division of Eastern Europe. Violent, and murderous Soviet military crackdowns in Lithuania and in Latvia in January 1991 had failed to crush the budding democratic movements in those countries. Military methods had also been employed, to no avail, to keep in line the Soviet republics of Georgia and Azerbaijan. (See my article, “How Lithuania Helped Take Down the Soviet Union.”)

Communist Conspirators for Soviet Power

On August 18, 1991, the hardline conspirators tried to persuade Gorbachev to reverse his planned political arrangements with the Russian Federation and Soviet Kazakhstan. When he refused he was held by force in a summer home he was vacationing at in the Crimea on the Black Sea.

Early on the morning of August 19, the conspirators issued a declaration announcing their takeover of the Soviet government. A plan to capture and possibly kill Boris Yeltsin failed. Yeltsin eluded the kidnappers and made his way to the Russian parliament building from his home outside Moscow. Military units loyal to the conspirators ringed the city with tanks on every bridge leading into the city and along every main thoroughfare in the center of Moscow. Tank units had surrounded the Russian parliament, as well.

But Yeltsin soon was rallying the people of Moscow and the Russian population in general to defend Russia’s own emerging democracy. People all around the world saw Yeltsin stand atop an army tank outside the parliament building asking Muscovites to resist this attempt to return to the dark days of communist rule.

The Western media made much at the time of the apparent poor planning during the seventy-two hour coup attempt during August 19 to the 21. The world press focused on and mocked the nervousness and confusion shown by some of the coup leaders during a press conference. The conspirators were ridiculed for their Keystone Cop-like behavior in missing their chance to kidnap Yeltsin or delaying their seizure of the Russian parliament building; or leaving international telephone lines open and not even jamming foreign news broadcasts that were reporting the events as they happened to the entire Soviet Union.

The Dangers If the Hardliners had Won

Regardless of the poor planning on the part of the coup leaders, however, the fact remains that if they had succeeded the consequences might have been catastrophic. I have a photocopy of the arrest warrant form that had been prepared for the Moscow region and signed by the Moscow military commander, Marshal Kalinin.

It gave the military and the KGB, the Soviet secret police, the authority to arrest anyone. It had a “fill-in-the-blank,” where the victim’s name would be written in. Almost 500,000 of these arrest warrant forms had been prepared. In other words, upwards of a half-million people might have been imprisoned in Moscow, alone.

The day before the coup began, the KGB had received a consignment of 250,000 pairs of handcuffs. And the Russian press later reported that some of the prison camps in Siberia had been clandestinely reopened. If the coup had succeeded possibly as many as three to four million people in the Soviet Union would have been sent to the GULAG, the notorious Soviet labor camp system.

Another document published in the Russian press after the coup failed had the instructions for the military authorities in various regions around the country. They were to begin tighter surveillance of the people in the areas under their jurisdiction. They were to keep watch on the words and actions of everyone. Foreigners were to be even more carefully followed and watched. And their reports to the coup leaders in Moscow were to be filed every four hours. Indeed, when the coup was in progress, the KGB began to close down commercial joint ventures with Western companies in Moscow, accusing them of being “nests of spies,” and arrested some of the Russian participants in these enterprises.

Fear Underneath a Surreal Calm

During the coup attempt Moscow had a surrealistic quality, as I walked through various parts of the center of the city. On the streets around the city it seemed as if nothing were happening – except for the clusters of Soviet tank units strategically positioned at central intersections and at the bridges crossing the Moscow River. Taxi cabs patrolled the avenues looking for passengers; the population seemed to go about its business walking to and from work, or waiting in long lines for the meager supplies of everyday essentials at the government retail stores; and motorists were as usual also lined up at the government owned gasoline stations. Even with the clearly marked foreign license plates on my rented car, I was never stopped as I drove around the center of Moscow.

The only signs that these were extraordinary days were the grimmer than usual looks on the faces of many; and that in the food stores many people would silently huddle around radios after completing their purchases. However, the appearance of near normality could not hide the fact that the future of the country was hanging in the balance.

Russians Run the Risk for Freedom

During the three days of that fateful week, Russians of various walks of life had to ask themselves what price they put on freedom. And thousands concluded that risking their lives to prevent a return to communist despotism was price they were willing to pay. Those thousands appeared at the Russian parliament in response to Boris Yeltsin’s appeal to the people. They built makeshift barricades, and prepared to offer themselves as unarmed human shields against Soviet tanks and troops, if they had attacked. My future wife, Anna, and I were among those friends of freedom who stood vigil during most of those three days facing the barrels of Soviet tanks.

Among those thousands, three groups were most noticeable in having chosen to fight for freedom: First, young people in their teens and twenties who had been living in a freer environment during the previous six years since Gorbachev had come to power, and who did not want to live under the terror and tyranny their parents had known in the past. Second, new Russian businessmen, who realized that without a free political order the emerging economic liberties would be crushed that were enabling them to establish private enterprises. And, third, veterans of the Soviet war in Afghanistan, who had been conscripted into the service of Soviet imperialism and were now determined to prevent its return.

The bankruptcy of the Soviet system was demonstrated not only by the courage of those thousands defending the Russian parliament, but also by the unwillingness of the Soviet military to obey the orders of the coup leaders. It is true that only a handful of military units actually went over immediately to Yeltsin’s side in Moscow.

But hundreds of Russian babushkas – grandmothers – went up to the young soldiers and officers manning the Soviet tanks, and asked them, “Are you going to shoot their mother, your father, your grandmother? We are your own people.” The final act of the coup came when these military units refused to obey orders and seize the Russian parliament building, at the possible cost of hundreds or thousands of lives.

Freedom! Freedom! Freedom!

On that clear, warm Thursday of August 22, that huge mass of humanity that had assembled in a large plaza behind the Russian parliament stood and listened as Boris Yeltsin told them that that area would now be known as the Square of Russian Freedom. The multitude replied in unison: Svoboda! Svoboda! Svoboda! – “Freedom! Freedom, Freedom!”

A huge flag of pre-communist Russia, with its colors of white, blue and red, draped the entire length of the parliament building. The crowd looked up and watched as the Soviet red flag, with its yellow hammer and sickle in the upper left corner, was lowered from the flagpole atop the parliament, and the Russian colors were raised for the first time in its place. And again the people chanted: “Freedom! Freedom! Freedom!”

Not too far away from the parliament building in Moscow, that same day, a large crowd had formed at Lubyanka Square at the headquarters of the KGB. With the help of a crane, these Muscovites pulled down a large statue of Felix Dzerzhinsky, the founder of the Soviet secret police that stood near the entrance to the KGB building. In a small park across from the KGB headquarters, in a corner of which rests a small monument to the victims of the Soviet prison and labor camps, an anti-communist rally was held. A young man in an old Czarist Russian military uniform burned a Soviet flag, while the crowd cheered him on.

The seventy-five-year nightmare of communist tyranny and terror was coming to an end. The people of Russia were hoping for freedom, and they were basking in the imagined joy of it.

Freedom’s Hope and Post-Communist Reality

The demise of the Communist Party and the Soviet system was one of the momentous events in modern history. That it came about with a relatively small amount of bloodshed during those seventy-two hours of the hardline coup attempt was nothing short of miraculous – only a handful of people lost their lives.

The last twenty-five years have not turned out the way that many of the friends of freedom in Russia had hoped.

Indeed, post-communist Russia saw a contradictory, poorly organized, and corrupted privatization of Soviet industry, plus a high and damaging inflation in 1992-1994; a severe financial crisis in 1998; a return to authoritarian political rule following Vladimir Putin’s rise to power in 1999; two bloody and destructive wars in the attempted breakaway region of Chechnya; widespread and pervasive corruption at all levels of government; state controlled and manipulated markets, investment, commerce, and the news media; assassinations and imprisonments of political opponents of the regime; and significant nostalgia among too many in the country for a return to “great power” status and the “firm hand” of the infamous Stalinist era. Plus, Putin’s recent military adventures in Crimea, Ukraine, and Syria.

Nonetheless, for those of us who were fortunate enough to be in Moscow in August 1991, it remains in our minds as an unforgettable historical moment when the first and longest-lived of the twentieth century’s totalitarian states was brought to the doorstep of its end. The Soviet Union, finally, disappeared off the political map of the world on December 24, 1991 with the formal breakup and independence of the 15 Soviet republics that had made up the Union of Soviet Socialist Republics.

The Soviet nightmare of “socialism-in-practice” was over.

Richard M. Ebeling is BB&T Distinguished Professor of Ethics and Free Enterprise Leadership at The Citadel in Charleston, South Carolina. He was president of the Foundation for Economic Education (FEE) from 2003 to 2008.

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author.

See the original article here.

Americans Are Going to be Disappointed in Election Outcome – Article by Ron Paul

Americans Are Going to be Disappointed in Election Outcome – Article by Ron Paul

The New Renaissance HatRon Paul
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It is a sad commentary on the state of political life in the United States that our political conventions have become more like rock music festivals than competitions of ideas. There has been a great deal of bombast, of insults, of name-calling, and of chest-beating at both party conventions, but what is disturbingly absent is any mention of how we got to this crisis and how we can get out. From the current foreign-policy mess to the looming economic collapse, all we hear is both party candidates saying they will fix it, no problem.

In her convention speech Hillary Clinton promised that she would “fight terrorism” and defeat ISIS by doing more of what we have been doing all along: bombing. In fact we have dropped more than 50,000 bombs on ISIS in Iraq and Syria over the past two years and all she can say is that she will drop more. How many more bombs will defeat ISIS? How many more years will she keep us in our longest war, Afghanistan? She doesn’t say.

In fact, the New York Times – certainly not hostile to the Clintons – wrote that it was almost impossible to fact-check Hillary’s speech because, “she delivered a speech that was remarkably without hard facts.”

Clinton’s top foreign policy advisor said just a day after her convention speech that her big plan for Syria was to go back to square one and concentrate on overthrowing its secular president. How many more thousands more will die if she gets her way? And won’t she eventually be forced to launch a massive US ground invasion that will also kill more Americans?

Clinton does not understand that a policy of endless interventionism has brought us to our knees and made us far weaker. Does she really expect us to be the policemen of the world with $20 trillion in debt?

Likewise, Republican candidate Donald Trump misses the point. He promises to bring back jobs to America without any understanding of the policies that led to their departure in the first place. Yes, he is correct that the middle class is in worse shape than when Obama took office, but not once did he mention how it happened: the destructive policies of the Federal Reserve; the financing of our warfare/welfare state through the printing of phony money; distorted interest rates that encourage consumption and discourage saving and investment.

Trump tweeted this week that home ownership is at its lowest rate in 51 years. He promised that if elected he will bring back “the American dream.” He seems to have no idea that home ownership is so low because the Fed-created housing bubble exploded in 2007-2008, forcing millions of Americans who did not have the means to actually purchase a home to lose their homes. Not a word about the Fed from Trump.

How are these candidates going to fix the problems we face in America if they have absolutely no idea what caused the problems? No matter who is elected, Americans are going to be very disappointed in the outcome. The warfare/welfare state is going to proceed until we are bankrupt. There is hope, however. It is up to us to focus on the issues, to focus on educating ourselves and others, and to demand that politicians listen.

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.

We’re Going Deeper into Debt as Real Incomes Fall – Article by Victor Xing

We’re Going Deeper into Debt as Real Incomes Fall – Article by Victor Xing

The New Renaissance HatVictor Xing

New York Fed President Dudley recently commented that “real consumer spending growth appears to have moderated somewhat from the relatively robust pace of the second half of 2015.” While this may suggest headwinds from cyclical economic conditions, there are emerging signs that ultra-accommodative policy also acts as a constraint on consumer spending via income effects. Instead of inducing savers to spend and borrow, rapid asset price appreciation as a result of monetary easing has outpaced wage growth, and pass-through services inflation subsequently reduced discretionary income and forced already-levered consumers to save instead of spend. This unintended consequence worked against accommodative policy’s desired substitution effects and suggests further easing would likely yield diminishing results if asset price appreciation continues to outpace real income growth.

Asset Price and Services Inflation Outpaced Real Wage Growth
Post-2008 policy accommodation broadly lowered funding costs for consumers and businesses to supported asset price appreciation. However, rising prices have also made assets less affordable, and home buyers “priced out” of their respective housing markets subsequently became involuntary renters. Not only do they not benefit from rising home values, higher education, and medical care inflation also outpaced aggregate real wage growth (Chart 1) to weigh on renters’ discretionary spending.

xing1In response with rising commercial real estate prices (Chart 2), businesses also pass on higher operating costs in the form of services inflation. Year-over-year personal consumption expenditure — services (chain-type price index) has been well-anchored in the 2% range (2.13% in Feb 2016) since 4Q 2011.

xing2Another factor constraining consumer spending is the well-publicized effect of student debt burden. This supports a view that household spending may be at a lower potential than during prior cycles, thus magnifying the costs of higher services inflation as a result of asset price appreciation.

Consumers Redlining their Engines: Inability To Pay $400 Emergency Expense
Accommodative monetary policy encourages consumers to spend and borrow rather than hoarding cash. However, cash-strapped consumers already facing the pressure of debt burden would likely do neither.

Federal Reserve’s recent Report on the Economic Well-Being of U.S. Households highlighted signs that some consumers are already stretching their spending power to meet existing obligations. 47% of respondents reported that a $400 emergency expense would be “more challenging to handle” (unable to use cash or a credit card that they pay off at the end of the mouth). Results from middle-income household with $40,000 to $100,000 annual income were similarly downbeat, where 44% of respondents indicated difficulties (Chart 3).

Chart 3: Percent of respondents who would completely pay an emergency expense that costs $400 using cash or a credit card that they pay off at the end of the month (by race/ethnicity and household income)

xing3Source: Federal Reserve Board of Governors

Chart 4: During the past 12 months, was there a time when you needed any of the following, but didn’t get it because you couldn’t afford it?

xing4Source: Federal Reserve Board of Governors

A survey on health-care expenses was also discouraging. 31% of respondents reported going without some type of medical care in the preceding 12 months due to inability to afford the cost. 45% of those surveyed under a household income of $40,000 reported similar decisions to defer treatment.

In the section “spending relative to income,” Fed researchers reported that one-in-five respondents with spending exceeded their income (leveraged spending). These are signs that consumers were taking advantage of lower rates, but the spending does not appear to be sustainable without corresponding rise in real wage growth.

Rising Renter Cost Burden
Another factor constraining discretionary spending is rising renter cost burden. The Harvard Joint Center for Housing Studies projected a “fairly bleak picture of severe renter burden across the U.S. for the coming decade.” The report acknowledged falling incomes among renters and the persisting gap between renter income and renter housing costs (Chart 6), as well as severely burdened renter households (housing costs of more than 50% of household income) reaching 11.8 million in 2015 (Chart 7), or about one in four renters.

Assuming the correlation between rental price inflation and asset price inflation holds, further declines in housing affordability as a result of policy easing would exacerbate renter burden — one likely needs rising real wages to offset.

Chart 5: In the past 12 months, would you say that your household’s total spending was more, less, or the same as your income? (by household income)

xing5Source: Federal Reserve Board of Governors

xing6xing7

Impacts of “Long and Variable Lags” Between Asset Price Inflation and Real Wage Growth
Financial market participants play an essential role in the transmission of Federal Reserve’s monetary policy by affecting financial conditions — the following components are part of the GS Financial Conditions Index:

  • Short-term bond yield
  • Long-term corporate credit spread
  • Stock market variable
  • Exchange rate

The Federal Reserve only has effective control of the very front-end of the Treasury curve via conventional monetary policy. Nevertheless, unconventional policies such as QE, as well as forward guidance on SOMA principal reinvestments also allow the central bank to affect longer-term funding costs via the expectations and “recruitment channel.” Under this mechanism, asset prices take little time to react to changing policy stances, while impacts on income growth and economic conditions would often take longer to manifest.

Such lag between asset price appreciation and changing economic conditions carries a hidden cost — if asset price inflation becomes well entrenched ahead of broad-based economic growth, those without assets would be penalized just to maintain their life-style, and the reduction in their discretionary spending would serve as a disinflationary drag to Federal Reserve’s effort to reflate the economy.

Conclusion
Inefficiencies within the monetary policy transmission mechanism have resulted in income effects becoming greater than the substitution effects. Under this scenario, ultra-accommodative policy may induce further saving by asset-less consumers to further weigh on aggregate demand. Additionally, policymakers should exercise caution if increasingly aggressive and unconventional reflationary policies do not yield intended results.

Victor Xing is founder and investment analyst at Kekselias, Inc. He is formerly a fixed-income trading analyst for the Capital Group Companies with 5 years of experience on its interest rates trading desk.

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.

Chasing 2 Percent Inflation: A Really Bad Idea – Article by John Chapman

Chasing 2 Percent Inflation: A Really Bad Idea – Article by John Chapman

The New Renaissance HatJohn Chapman

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In just two years, inflation targeting (namely, the quest for 2 percent inflation) has gone from the lunatic fringe of economics to mainstream dogma. Much of the allure springs from notions that a little inflation motivates people to speed up spending, thereby greatly increasing the efficacy of central bank stimulus. It is touted as a cure for sagging demand and a defense against the (overly) dreaded deflation.

Other benefits include melting away some of the massive government and private debts and improving people’s perception of progress as they see their nominal wages rise. Employers can lower real wages without unpopular dollar pay cuts. The Fed can allow price increases to signal the need for production responses, allow for minor supply shocks and for monopolistic industries to increase prices all without a monetary response that would hurt other elements of the economy.

For the politicians it provides a tax windfall in the form of capital gains taxes on inflated assets and income taxes on interest that simply reflects inflation. It also necessitates printing more money thereby earning seigniorage (profits from printing money) for the government. In addition, it provides cover for competitive currency devaluation and is a great excuse to kick the can down the road: “Let’s not tighten before we reach our highly desired inflation target.”

What’s Magical about 2 Percent Inflation?
Then there is the question of why 2 percent? Perhaps that was seen as a still comfortable rate during some past periods of strong growth. Conditions today are very different, which perhaps suggests they are trying to imitate past growth by copying symptoms instead of substance. Of course for politicians, permission to print money is a godsend, and with inflation all around the developed world below 2 percent, it was “all aboard!”

Clearly not all of the features above are desirable, but even some of the touted ones are underwhelming. While increased inflation expectations will speed up spending, it is far from being the reservoir of perpetual demand that some seem to believe. Essentially, a onetime increase in expectations of a new steady rate of inflation would speed up purchases for the period ahead, but with negligible net effects in subsequent periods — a onetime phase shift in demand.

The Danger of Raising Interest Rates
After almost eight years of stimulus, the Fed has taken its first timid steps toward normalizing monetary policy. That means we will soon have to contend with something entirely absent during the years of easy money — a bill for all of the goodies passed out and the distortions created. And what a bill! A 3 percent rise in average interest rates on just our present government debt over the next few years would ultimately amount to over $500 billion a year in additional interest expense, equal to roughly 1/7 of current Federal tax receipts. Those bills start arriving with a vengeance when rates go back up, and for the first time in years the market will see concrete evidence of whether the US and other governments are willing to pay the price of continuing to have viable currencies.

Prior to the appearance of inflation targeting, I was already dreading the impact of political interference with efforts to return to normal. But targeting makes every politician an economist, able to make simplistic, grandstanding statements with the authority of the Fed’s own model. This makes the problem far worse.

Two percent, which has (foolishly) been defined as desirable, will quickly be interpreted as an average. “So what’s the big deal,” critics will say, “about a pop to 3 percent or more, after all it has spent years ‘below target’, and if you excluded a handful of ‘temporary exceptions’, it would still be only 2 percent …?” Imagine the political storm if the Fed decided to quickly raise rates a couple of full percentage points in response to a surge in inflation to 3 percent.

There are a lot of people (especially politicians) whose short-term interests would be harmed by a sharp rise in interest rates. Lulled by today’s relative calm, many fail to appreciate how explosive the situation becomes when we transition from the concerned waiting of the long easy money period to the concrete tests of our credibility during renormalization. If we had to temporarily sacrifice half a percent from our already tepid growth rate to preserve the credibility of the dollar, that would pale next to the cost of worldwide panic and collapse. Unfortunately the sacrifice part is up front.

Americans think of inflation as a purely monetary phenomenon, which the mighty and independent Fed has handled in the past and will again if necessary. Actually once the inflation genie starts to escape from the bottle it becomes purely a political problem. Even the most determined central banker is helpless if the people refuse to accept the paper money, the politicians balk and take away the bank’s independence, or there is an opposition political party promising a credible-sounding and painless alternative plan. It comes down to what the market sees as the political will and ability to pay the short-term cost of reining in the inflation.

The Political Advantages of the 2 Percent Target
Political resistance to the cost of moving back to normal plus our willingness to decisively confront signs of panic will be watched carefully by owners of dollars and dollar instruments. This is a huge liquid pool which could stampede en masse into wealth storage and productive assets. Such a run would quickly become unstoppable and would mean a collapse of the world economy. Inflation targeting greatly facilitates the political opposition to decisive Fed action right at the first critical test points where there might still be hope of heading off an uncontrollable panic.

Deliberately seeking higher inflation amounts to intentionally damaging people’s faith in a fiat currency, one already in danger from massive debt, disquiet over novel monetary policy, and noises from Congress about reducing Fed independence. Targeting also provides a handy excuse to delay returning to normal, thereby worsening the mounting distortions. Finally, it invites wholesale political interference with the Fed’s efforts to manage an orderly return to normal financial conditions.

John Chapman is a retired commodity trader, having headed his own small trading firm for over thirty years. Prior to that he worked in the international division of a large New York bank, managed foreign exchange hedging for a major NY commodity firm, and worked as a silver trader.

Economics, especially money and banking, has been a passion of his since college. In 1990 he took a trip to South America for the express purpose of studying inflation “at its source.” His formal economics credentials consist of half a dozen courses, five of which were as an undergraduate at MIT (where he majored in aeronautical engineering.) He also received an MBA from the University of Arizona.

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.