Power & Market
Charging the price of an expensive car for a garden-variety amino acid, one we eat every day.
A year ago, the Food and Drug Administration ( FDA) approved a “drug” called Endari to treat sickle cell disease, which afflicts about 100,000 Americans of African descent and around 25 million more outside the US. Price tag: $28,000 a year.
So what is Endari? Anything approved by the FDA legally becomes a “drug.” But some have noted this “drug” is just a higher dose of L-glutamine, a common amino acid that is in our food and that our bodies also make. Indeed, The agency itself describes this “drug” as "L-glutamine oral powder.” Amino acids are the building blocks for protein and we also use them for other purposes.
So here we have a “drug” intended to help Americans of African descent, but because it has been approved by the FDA, now costs more than $500 per week. Normally “drugs” benefit from two government monopoly grants: first a patent and then FDA approval. That ensures no competition and the ability to charge more than would be the case without a government-restricted market.
Glutamine, being a natural substance, cannot be patented stand alone, but the FDA approval still guarantees a monopoly, because nobody else will want to pay the cost of entering the market. The total cost of gaining approval averages in the billions. Even Endari, approved under the “Orphan Drug Act,” would have cost enough to keep a competitor out, and in addition the FDA would not look well on a second application under that Act. FDA approval is also crucial because Medicaid and Medicare and Veterans will then pay for it. They will not pay for a supplement, even if it is the same thing, even if it costs less than a tenth as much.
There is still an existing drug for sickle cell disease called hydroxyurea, which also costs less than a tenth as much as Endari, but which has serious side effects. The insert warns of anemia and leukemia, and in addition it may not work. Nevertheless, some insurance companies are telling doctors to continue to use hydroxyurea first. They are not of course telling doctors to do the logical thing which is to use the supplement form of glutamine.
Responding to Russian-funded political advertisements, Facebook chairman Mark Zuckerberg declared last month that “we will do our part to defend against nation states attempting to spread misinformation.” But Facebook is effectively sowing disinformation by kowtowing to foreign regimes and censoring atrocities such as ethnic cleansing in Myanmar. In the name of repressing fake news and hate speech, Facebook is probably suppressing far more information than Americans realize.
Facebook blocked a post of mine last month for the first time since I joined it nine years ago. I was seeking to repost a blog article I had written on Janet Reno, the controversial former attorney general who died last year. I initially thought that Facebook was having technical glitches (no novelty). But I checked the page and saw the official verdict: “Could not scrape URL because it has been blocked.”
“Pshaw!” I said, or some other one-syllable epithet. I copied the full text of the article into a new blog post. Instead of using “Janet Reno, Tyrant or Saint?” as the core headline, I titled it: “Janet Reno, American Saint.” Instead of a 1993 photo of the burning Branch Davidian compound in Waco, Texas, I substituted an irreproachable official portrait of Reno. Bingo — Facebook instantly accepted that crosspost. I then added a preface detailing the previous blockage and explaining why I sainted Reno. The ironic headline attracted far more attention and spurred a torrent of reposts by think tanks and other websites.
I contacted Facebook’s press office to learn why the initial post was blocked. Facebook spokeswoman Ruchika Budhraja checked into the matter and notified me that I would be permitted to post that link. "But why was it blocked?" I replied. She responded: “There was an image in the post that incorrectly triggered our automation tools. That issue has been corrected.”
So when did showing the home of more than 70 people engulfed in flames after a FBI assault become beyond the pale? Facebook presumably blocked everyone who sought to share that image from the most vivid law enforcement debacle of the 1990s.
This was not the first time Facebook erased an iconic image that the U.S. government would be happy to see vanish. Facebook likely deleted thousands of postings of the 1972 photo of a young Vietnamese girl running naked after a plane dropped napalm on her village. After coming under severe criticism last year, Facebook announced that it would no longer suppress that image. Unfortunately, Facebook is unlikely to disclose a list of the images it bans. Because most Americans are clueless about current events and recent history, they will have little idea of what vanishes into the Memory Hole.
Read the full article at USA Today
New York Republican Congressman Chris Collins was indicted today on a variety of charges stemming from an investigation of insider trading. Prosecutors allege that he, along with son and soon to be son-in-law, is guilty of trading on non-public information concerning the results of a drug trial. Collins traded stock in Innate Immunotherapeutics Limited, a company where Collins is a board member, in order to avoid over $768,000 in losses.
While there is undoubtedly numerous actions Collins has taken as a Congressman that warrants him being criticized by society, insider trading is not one of them. This news story is a good opportunity to revisit an article by Bob Murphy on the subject, explaining how insider trading actually has social value and why laws cracking down on the practice open the door to the heavy hand of government going after all sorts of profitable activity.
Excerpted from Is Insider Trading Really a Crime?
We Want People Trading on Unique Knowledge
To understand the social benefits of insider trading, we have to first realize that stock prices mean something. They reflect real facts about the world, such as the assets and liabilities of a particular corporation and how effectively its current management is using resources to satisfy customers.
If a computer glitch suddenly swapped the prices randomly on all corporate stocks, the result would be disastrous, and it would affect "Main Street" as much as Wall Street. For an exaggerated example, if the share price of Microsoft fell from its current level of around $25 down to $1, a "corporate raider" might find it very profitable to borrow money, buy a controlling share in the company, and sell off all company assets to the highest bidders. The high price of $25 per share fends off such efforts to break up the successful company. The assets currently owned by the Microsoft Corporation are best deployed by Microsoft, rather than being integrated into different organizations around the world.
In general, speculators perform a useful social service when they are profitable. By buying low and selling high (or by short-selling high and covering low), stock speculators actually speed up price adjustments and make stock prices less volatile than they otherwise would be.
In this context, we can see the absurdity of the general view of "insider trading." There is a whole literature on the economic analysis of the subject, and economist Alex Padilla's 2003 dissertation defended the practice from a specifically Austrian angle. In a nutshell, insider trading is beneficial because it moves market prices closer to where they ought to be. Those profiting from "inside knowledge" actually share that knowledge with the rest of the world through their buying and selling.
Insider Trading: Who Is the Victim?
Above, we acknowledged the fact that obtaining information in illegal ways obviously had actual victims. But the mystique behind "insider trading" suggests that somehow if a person financially profits from special knowledge, that he or she is bilking the general public.
In general, this analysis doesn't hold up, as Murray Rothbard has pointed out. For example, suppose a Wall Street trader is at the bar and overhears an executive on his cell phone discussing some good news for the Acme Corporation. The trader then rushes to buy 1,000 shares of the stock, which is currently selling for $10. When the news becomes public, the stock jumps to $15, and the trader closes out his position for a handsome gain of $5,000. Who is the supposed victim in all of this? From whom was this $5,000 profit taken?
The $5,000 wasn'ttaken from the people who sold the shares to the trader. They were trying to sell anyway, and would have sold it to somebody else had the trader not entered the market. In fact, by snatching the 1,000 shares at the current price of $10, the trader's demand may have held the price higher than it otherwise would have been. In other words, had the trader not entered the market, the people trying to sell 1,000 shares may have had to settle for, say, $9.75 per share rather than the $10.00 they actually received. So we see that the people dumping their stock either were not hurt or actually benefited from the action of the trader.
In fact, the only people who demonstrably lost out were those who were trying to buy shares of the stock just when the trader did so, before the news became public. By entering the market and acquiring 1,000 shares (temporarily), the trader either reduced the number of Acme shares other potential buyers acquired, or he forced them to pay a higher price than they otherwise would have. When the news then hit and the share prices jumped, this meant that this select group (who also acquired new shares of Acme in the short interval in question) made less total profit than they otherwise would have.
Once we cast things in this light, it's not so obvious that our trader has committed a horrible deed. He didn't bilk "the public"; he merely used his superior knowledge to wrest some of the potential gains that otherwise would have accrued as dumb luck to a small group of other investors.
To repeat, stock-market speculation is not a zero-sum activity. Even though we can look at any particular transaction and tally up the "winners" and "losers," the presence of speculators enhances the overall functioning of the stock market. For example, the market for any particular security is more liquid when there are rich speculators who will quickly pounce on a perceived mistake in pricing. If an institutional investor (such as a firm managing pensions) suddenly has a cash crunch and needs to dump its holdings, speculators will swoop in and put a floor under the fire-sale price. This is good for the beleaguered pension fund, and for the stock market in general.
Laws against Insider Trading Give the Government Arbitrary Power
Crackdowns on insider trading are harmful because they chill the cultivation of superior knowledge and speculative correction of market prices. Beyond this loss of general economic efficiency, insider-trading laws are insidious because of the arbitrary power they give to government officials.
In the specific case of Rajaratnam, prosecutors for the first time relied extensively on wiretaps to prove their allegations of insider trading. Legal experts predict that the government will expand its eavesdropping on the financial community in light of this courtroom "success."
More generally, Murray Rothbard argued that every firm on Wall Street is technically engaging in "insider trading." If they literally relied only on information that was available to the public, how could they make any money? Thus, the government has the statutory authority to harass or even shut down anybody in the financial sector who doesn't play ball. In Making Economic Sense, Rothbard declared,
There is another critical aspect to the current Reign of Terror over Wall Street. Freedom of speech, and the right of privacy, particularly cherished possessions of man, have disappeared. Wall Streeters are literally afraid to talk to one another, because muttering over a martini that "Hey, Jim, it looks like XYZ will merge," or even, "Arbus is coming out soon with a hot new product," might well mean indictment, heavy fines, and jail terms. And where are the intrepid guardians of the First Amendment in all this?
But of course, it is literally impossible to stamp out insider trading, or Wall Streeters talking to another, just as even the Soviet Union, with all its awesome powers of enforcement, has been unable to stamp out dissent or "black (free) market" currency trading. But what the outlawry of insider trading (or of "currency smuggling," the latest investment banker offense to be indicted) does is to give the federal government a hunting license to go after any person or firm who may be out of power in the financial-political struggles among our power elites. (Just as outlawing food would give a hunting license to get after people out of power who are caught eating.) It is surely no accident that the indictments have been centered in groups of investment bankers who are now out of power.
To drive home just how arbitrary and non-criminal "insider trading" really is, consider this scenario: Suppose someone had been planning on buying shares of Acme, but just before doing so, he caught wind of a bad earnings report. In light of the new information (which was not yet public), the person refrained from his intended purchase. Should this person be prosecuted for insider non-trading?
Caitlin Long, a 22-year Wall Street veteran and a leader in the cryptocurrency sphere, recently took to Forbes to write about the pros and cons of the Intercontinental Exchange (parent of the New York Stock Exchange) announcement that it is building "a new ecosystem for cryptocurrencies." As she explains, while this is a major leap forward in the "normalization" of crypto, she has some concerns about what a growing role for Wall Street in the industry:
Bakkt is yet more evidence that incumbent institutions are increasingly taking the “join ‘em” approach to cryptocurrencies, as explored in Part 1 of my 3-part series about the building rivalry between cryptocurrencies and Wall Street. Bakkt could bring many positives to cryptocurrencies:
it will likely attract more institutional investors to cryptocurrencies,
it may solve the custody problem that has so far kept large institutions from investing in the cryptocurrency asset class due to the absence of a qualified custodian, which the SEC requires for investment advisors that manage $150 million or more,
it may help regulators become more comfortable with the sector to see ICE involved, and
most importantly—it will probably attract corporate issuers to raise capital using the Bakkt ecosystem. Cryptocurrencies offer issuers the prospect of covenant-free and preference-free capital at low cost. Investors have proven their willingness—rational, in my view—to trade standard investor protections in return for the low friction costs involved with cryptocurrencies—there are no underwriters, trustees, transfer agents, exchanges, custodians, clearinghouses or central securities depositories involved in cryptocurrency issuance, and—very importantly—cryptocurrency trades settle instantly and with no counterparty risk. Moreover, issuers incur only a small percentage of the costs of being a public company, such as investor relations costs, proxy solicitation costs and the significant compliance costs related to public-company financial reporting and auditing. Additionally, cryptocurrency issuers can repurchase coins or execute a tender/exchange offer much more efficiently than for traditional securities.
I doubt it will be very long before major corporate issuers join Telegram and Eastman Kodak in raising capital via these markets. This is the good type of financialization—attracting new investors to the networks, each of whom (in proof-of-work blockchains) makes the networks more secure by bringing new computer resources to the networks, directly or indirectly on their behalf—and that, in turn, makes the networks more decentralized, resilient and immune to attack.
Kudos to ICE for being first!
But ICE’s news also has downsides. As explored in Part 2 of the 3-part series just two days ago, Wall Street's only shot at controlling cryptocurrencies is to financialize them via leverage—by creating more financial claims to the coins than there are underlying coins and thereby influencing the underlying coin prices via derivatives markets. It’s pretty much impossible at this point for anyone to gain control of the Bitcoin network (and likely the other big cryptocurrency networks too), so Wall Street's only major avenue for controlling them is to financialize them via leverage.
The financial system has perfected the art of leverage-based financialization, unfortunately, and ICE’s announcement about plans to launch a regulated, physical bitcoin futures contract and warehouse (subject to CFTC approval) in November means leverage-based financialization is likely coming to bitcoin in a big way.
This is exactly what I’d warned of in Part 2:
“As cryptocurrency markets develop further, here’s what I’ll be on the lookout for: financial institutions beginning to create claims against cryptocurrencies that are not fully backed by the underlying coins (which could take the form of margin loans, coin lending / rehypothecation, coin-settled futures contracts, or ETFs that don’t 100% track the underlying coins at any given moment). None of these are happening in the market yet, though.
“So far, regulators have only allowed bitcoin derivatives in cash-settled form among major derivatives counterparties. While cash-settled derivatives can affect the price of the underlying asset, the magnitude of the impact is lower than the impact if derivatives were settled in an underlying that is “hard to borrow” or “special” (using securities lending parlance). Bitcoin is especially “hard to borrow” so a requirement to deliver the underlying bitcoins into derivatives contracts would amplify bitcoin’s price fluctuations.
“Eventually it’s likely regulators will approve bitcoin-settled derivatives among major derivatives counterparties. At that point, banks will be looking to borrow the underlying bitcoin—and that’s when the custodial arrangements made by institutional investors will start to matter. Will custodians make their custodied coins available for borrowing in “coin lending markets” as they do with securities lending today? Or will they deem the cybersecurity risks of lending coins (which entails revealing private keys) too high relative to the extra return available for coin lending? And will institutional investors even allow coin lending by their custodians? Regardless, when bitcoin-settled derivatives appear on the scene, it’s very likely that cryptocurrencies will be “hard to borrow” for quite some time because HODLers (long-term holders) own most coins and rarely use custodians.” (emphasis added)
Why does this matter? Bitcoin has algorithmically-enforced scarcity, and that’s a big part of what gives it value. If Wall Street begins to create claims to bitcoin out of thin air, unbacked by actual bitcoin, then Wall Street will succeed in offsetting that scarcity to some degree.
Read the rest of the article here.
For more on this topic, listen to Cailtin Long's talk at our recent Future of Money conference in San Francisco.
One would think this doesn't need to be said, but apparently it is: there's a difference between deporting foreign nationals, and murdering people en masse.
Having already thrown Godwin's law out the window by insisting that Donald Trump is "literally Hitler" the American left has now moved on to blithely comparing the detention of accused non-government-approved immigrants to Nazi death camps.
It's perfectly possible to oppose the detention policies without comparing them to the Holocaust, of course. Multiple Jewish organizations, for instance, such as this one , oppose the deportation policies, but point out the irresponsible nature of comparing them to Nazi death camps:
If somebody compared something I did to the Nazis, I hope in outrage I would jump right to the heart of Nazism: “The Nazis’ aim was to harness all the power of the state to industrial-scale murder and the destruction of an entire race. Unless you are actually talking about genocide, it’s demagoguery to compare any policy with which you disagree to Nazism.”
Having long ago gone off the deep end with All Things Trump, however, the sort of people who make these comparisons actually seem to think this is appropriate. But, as Bret Easton Ellis — who's not exactly a rightwing stooge — recently pointed out, the constant comparisons to Nazism has become insufferable:
These last few weeks really were a flipping point for me, with the depression over the Supreme Court and the way the detention centers were being spun by the liberal media. It’s obviously a game. Here’s Rachel Maddow crying on TV, and pictures of Trump detention centers. My stepfather, who is a Polish Jew, had his entire family wiped out when he was an infant. Throwing around words like Nazi, Gestapo and comparisons to Weimar Germany is like, “Really guys? You’re going there?” I’ve had enough.
Now we hear about a theater company in Los Angeles that's producing an updated version of the Diary of Anne Frank in which the family is hiding from American immigration agents instead of Nazis.
This position is basically the equivalent to saying that having your entire family worked to death or starved to death or gassed to death in a Nazi "labor" camp is the same thing as temporary detention and deportation. Moreover, keep in mind that the deportees are not stateless. They are foreign nationals who retain their citizenship in their home countries. Were they stateless, they would have additional legal protections under the US legal system. Victims of the Holocaust, of course, were either stateless — having had their citizenship abolished by the German state — or they were prisoners of an invading state. They weren't allowed to return to their home countries. Not even in theory.
The actual "living" conditions within the camps themselves was in no way comparable to those in American immigration detention centers today. Even when the Nazis weren't actively trying to kill people, they created conditions that led to countless deaths through disease. One example of course, is the typhus epidemic that likely killed Anne Frank.
And that last statement is an important reminder: Anne Frank died in custody of the German state — along with about 95 percent of her fellow Holocaust victims from the Netherlands.
Comparing that to modern American immigration policy strains all credibility to the point of being darkly laughable.
Moreover, current immigration policy in the US isn't even comparable to previous outrages in this country. For instance, one could point to the spate of lynchings and other killings that occurred in 1915 in the wake of the so-called Plan de San Diego in which elements in the Mexican government had attempted to incite a "race war" in the US using disgruntled Mexican-Americans. The plan to attack Anglos was small and failed, but was comparable to what we might call "terrorism" today. Around 20 Anglo Texans died in the attacks.
But the backlash was immense. In response, the Texas Rangers and local informal militias engaged in “a systematic manhunt” that made few efforts to target the actual perpetrators of the killings, but was geared more toward executing a campaign of terror against Mexican-Americans. Observers at the time estimated that the number of those killed numbered anywhere from 150 to 1,500 people, although the consensus today appears to come in around 300.
Benjamin Herber Johnson, in his book Revolution in Texas recounts some of the details from the time:
By early fall, the signs of the vigilantism were inescapable. It was not just that Tejanos [i.e., Mexican-Americans] knew of friends and relatives who were dealt summary justice and could speculate about the changes of meeting such a fate themselves. The violence directed at them had clear public manifestations in the piles of bodies left to rot in public. ..
Yet those who yearned to bury their loved ones were often too afraid to do so. The Rangers and vigilantes targeted relative of alleged bandits, and so to bury a friend or relative was to court death…
The ongoing sights were enough to convince any Tejano that there was no refuge in South Texas. In mid-September, for example, someone traveling from San Benito to Edinburg might have seen what a New York reporter witness “The bodies of three of the twenty or more Mexicans that were locked up overnight in the small frame jail at San Benito were found lying beside the road two miles east of the town this afternoon. All three of them were shot in the back.”
Tejanos also knew that their persecutors made deliberate efforts to terrorize those whom they did not kill outright … Others also recalled burnings. Interviewed by his grandson nearly sixty years later, Francisco Sandoval emphasized that the Rangers killed people simply for the pleasure of it, adding that “they burnt them, they burnt them alive…”
After awhile [sic] the sheer number of lynchings may have inured residents, especially Anglos; terror and fear had become part of daily life.
The anti-Mexican-American reprisals didn't stop in 1915. They continued sporadically for years afterward, as noted in 2015 in the New York Times:
On Jan. 28, 1918, a band of Texas Rangers and ranchers arrived in the village of Porvenir in Presidio County, Tex. Mexican outlaws had recently attacked a nearby ranch, and the posse presumed that the locals were acting as spies and informants for Mexican raiders on the other side of the border. The group rounded up nearly two dozen men, searched their houses, and marched 15 of them to a rock bluff near the village and executed them. The Porvenir massacre, as it has become known, was the climactic event in what Mexican-Americans remember as the Hora de Sangre (Hour of Blood). It led, the following year, to an investigation by the Texas Legislature and reform of the Rangers.
The acts had real repercussions for Mexican-Americans at the time.
Many Mexican-Americans in the region relocated to other states to escape the Texas Rangers, and some returned to Mexico. My own grandparents, being Mexican-Americans themselves, relocated to California from El Paso in part to escape the legal and political environment in Texas at the time. According to my grandmother, her brother Benito denounced the "gringos" and moved back to Mexico where he opened a hotel.
Unfortunately, that generation has long since passed on, but it's unlikely that even they, who themselves were acquainted with true ethno-nationalist bigotry, would ever allow themselves to make the sorts of over-the-top assertions now made by anti-Trump activists. In fact, the Nazi comparisons seem to be primarily the domain of highly educated non-Hispanic whites who feel the need to virtue signal by comparing every injustice to Nazi mass murder.
When a naked intruder broke into the Aurora, Colorado home of Richard Black in the middle of the night , the intruder began violently attacking Black's 11-year-old grandson.
Black quickly armed himself with a gun, and shot the intruder dead, possibly saving the life of his grandson, who was hospitalized after the attack.
And then the Aurora Police Department showed up and shot Black dead.
The police claim they told Black — a Purple-Heart recipient and war veteran who apparently has suffered hearing loss — to drop his gun. This, they tell us, justified the shooting.
The City of Aurora has so far refused to release any audio or video associated with the shooting, but if the Police Department's story is to believed, Black was shot dead by a police officer who was already under investigation for another shooting. The officer, of course, remained on duty with pay.
In a situation like this — which admittedly likely involved a truly chaotic scene — defenders of government police will claim that it's was all just a misunderstanding and ask "what should have been done differently?"
The police and their defenders only ask this question rhetorically, though. They already know the answer. The answer, for them, is that nothing could be done differently. Everything's fine.
It's the usual defense: it was a stressful situation and the police had to make "split second decisions."
For people who actually care about the rights of taxpayers to not be shot by police in their own homes, though, this answer isn't good enough. The answer is not "nothing." The answer is "how can police be made to face real costs when they fail to act competently."
But what incentive to police have to answer this question? There is very little incentive, since the police are unlikely to bear any cost for what was, at best, a poorly executed response to a call about a home invasion. Instead, one department of the city (i.e., the District Attorney's office) will investigate another department. The city will likely determine that "procedures were followed" and that will be the end of it.
There will be no true incentive to take a hard look at procedures or at the sort of personnel the Department hires. After all, as a government-monopoly agency, the Police Department doesn't have to worry about losing customers or being subject to prosecution by a third party. Moreover, even if the city is eventually found guilty of some impropriety in a civil suit, it will be the taxpayers who will foot the bill for any compensatory damages. The police officers involved are unlikely to face any sort of penalty. No Police personnel will face any threat to their generous pensions or their secure and well-salaried jobs.
A Big Double Standard
Even worse is the fact that there is no penalty for accidental shootings when committed by police. But accidents can lead to hard prison time for private citizens when the situation is reversed.
Consider for example, the case of Tyler Harrell. As Tho Bishop reports, when police broke into Harrell's house in the middle of the night — with no evidence of wrongdoing by Harrell other than a social media post and an anonymous complaint — Harrell defended himself from the unidentified invaders by non-fatally shooting one of the SWAT team members in the leg.
But when a police officer is shot accidentally, things are very different. Harrell has been sentenced to 13 years in prison.
Harrell, of course, also had to make a "split-second decision" when people were breaking into his home in the middle of the night. When police officers make mistakes, though, it's all just unavoidable. "'Heroes' make mistakes, after all, and there's no reason to change anything. That's just the way things are." If a private citizens makes a similar mistake? Well, then a lengthy prison sentence is in order.
And why should the police change anything? Thanks to various immunity laws, and the fact they enjoy a taxpayer funded monopoly, they have no reason to be responsive to the taxpayers' needs or wants. Indeed, should the taxpayers question anything, they're told to be quiet and defer to "the experts."
RELATED: "Police: We're the Experts — Don't You Dare Criticize Us" by Ryan McMaken
But if calling 911 to report a home intruder leads to being gunned down by police, we can simply hold up this case as just the latest example of how the public's so-called "social contract" with the state and its police agents isn't working.
Trump’s tariffs are simply, in the words of economist Murray Rothbard, “not only nonsense, but dangerous nonsense, destructive of all economic prosperity.” Business owners who are suffering from this ham-handed government intervention should be the first to complain, whether having voted for Trump or not.
I asked a friend of a business owner (a fan of the president), what the owner thought of the tariffs. “He’s for them,” came the answer.
“But his profits have to be impacted,” I countered, “since he uses steel in his manufacturing.”
“Yes, but he thinks it will all work out in the long run,” was the reply.
“But, his profits are being diverted to the government. Wouldn’t he rather have the profits than the government?”
“Yes, but there are not any American cars being sold in China,” my friend countered, using one of the president’s bromides.
Dangerous nonsense indeed.
The New York Times’ Nelson Schwartz reports a similar feeling from Banner Metals in Columbus, Ohio. “I’m not looking at what’s best for Banner right now,” Bronson Jones, a part-owner of the company and its chief executive told Schwartz. “I’m looking at what’s best for the national economy. The U.S. has been taken advantage of for too long.”
What? The Fed and Treasury conspire to conjure dollars from the ether, and these amounts on a ledger or pieces of paper are tradable for actual goods, but the US has somehow been done wrong? How could anyone, the owner of a business no less, believe such a thing?
“We are not, if we were ever, a world of self-sufficient farmers,” Rothbard wrote. “The market economy is one vast latticework throughout the world, in which each individual, each region, each country, produces what he or it is best at, most relatively efficient in, and exchanges that product for the goods and services of others.”
“If it comes out of my paycheck, so be it,” Banner maintenance technician Casey Jackson told the Times. “You got to look at the big picture. That tiny bit of sacrifice we make will create jobs.”
No, that sacrifice destroys jobs. What’s taken from Jackson is given to inefficient producers who will waste capital and ultimately extinguish jobs. “Protectionism is simply a plea that consumers, as well as general prosperity, be hurt so as to confer permanent special privilege upon groups of inefficient producers, at the expense of competent firms and of consumers,” wrote Rothbard.
However, tariff victims are standing by their man. “He’s going for the jugular, which is typical Trump style,” Mr. Jones said. “I’m not used to it, and it’s not a presidential style we are accustomed to. But he’s the only president who’s taken a significant stance on trade, and we need a brash approach.”
Actual free trade would be a brash approach, not going full blown Smoot-Hawley. But don’t try to convince the guys on the Banner shop floor of any economics 101 mumbo-jumbo. “It’s aggressive, it’s tough, and he [Trump] won’t back down,” Mr. Jackson said. “Using trade as a bargaining chip will help someone else put food on the table.”
Todd Grizzle, a 25-year-old maintenance technician, put in his two cents worth and hit the nail on the head. “I like the idea of the U.S. having allies,” he said. “But if this can bring more jobs back to America, that’s a good thing.”
Consumers will pay more for goods, some people will lose their jobs or receive pay cuts but it’s all worth it for the red, white, and blue. Rothbard explained the danger decades ago. Tariffs and protectionism “is a peculiarly destructive kind of bailout, because it permanently shackles trade under the cloak of patriotism.”
McDonalds has announced that they will be releasing MacCoins in celebration of the 50th anniversary of the Big Mac. While crypto-related gimmicks have proven to be profitable, there is no blockchain involved, instead customers will receive a physical coin whenever they purchase a Big Mac. CNN Money reports that McDonalds has 6.2 million MacCoins ready for distribution.On social media, I've seen conversations about whether MacCoins, at 1:1 part with a Big Mac, would be a more effective store of value than a traditional Federal Reserve dollar. If the chain was willing to honor MacCoins indefinitely in the future, the answer would appear to be yes. Looking at the Big Mac Price index, a measure The Economist uses to track Purchasing Power Parity between foreign currencies, the price of a Big Mac has risen over 300% in the past 32 years. In fact, as D. H. Taylor has noted, the Big Mac is an American staple that has seen its price rise dramatically more than official CPI numbers. Unfortunately Ronald McNixon will close the Big Mac window at the end of the year, rendering the MacCoins to simply nominal value. Of course, if we had a system of competing currencies — as Ron Paul has long championed — it would be fun to see what sort of experiments would emerge in money. Senator Rand Paul openly discussed currency backed by private stocks during his presidential campaign, while the rise of cryptomania has even smalltime pizza companies looking at ways to provide additional value to workers.
Eliminate taxes on alternative currencies and ending legal tender laws would not only open the doors to monetary innovation but help empower Americans to new ways to protect their savings. Because at the end of the day, I would much rather trust the Hamburglar than those currently in charge with the Fed.
At the recent Mises University, Jeff Deist and Ryan McMaken recorded a live edition of Mises Weekends focused on radical decentralization and addressing some of the points raised against it. While in this conversation and in many others related to it intellectual titans like Mises and Rothbard are invoked to support the decentralist view, many libertarians unfortunately fail to call upon one of the most articulate critics of centralized political power with unparalleled intellectual and cultural influence; JRR Tolkien. While Tolkien is no doubt a popular figure among many libertarians, an unfortunate unfamiliarity with his work on a deeper intellectual level often prevents his enormous cultural influence from being brought to bear against the forces of statism and centralization.
There is no need to wonder about Tolkien’s political leanings, as he made them quite explicitly clear in a 1943 letter to his son Christopher Tolkien (who would later edit a great many of Tolkien’s posthumous works) he wrote “My political opinions lean more and more to Anarchy (philosophically understood, meaning abolition of control not whiskered men with bombs) – or to 'unconstitutional' Monarchy.” In the same letter Tolkien continued that “Anyway the proper study of Man is anything but Man; and the most improper job of any man, even saints (who at any rate were at least unwilling to take it on), is bossing other men. Not one in a million is fit for it, and least of all those who seek the opportunity.”
With such political sentiments, it is hardly surprising then that Tolkien incorporates a disdain for centralized power and a warning about its seductive nature in his work. In The Lord of the Rings, perhaps Tolkien’s best known work, the story traces the journey to destroy the One Ring of Power and chronicles the various effects the potential to wield this power can have. Tolkien does not attempt to hide the nature of the Ring, its purpose is clearly labeled upon itself:“One ring to rule them all, one ring to bind them, one ring to bring them all and in the darkness bind them.” The One Ring is just that, one, singular, representative of a unitary will that imposes itself upon all.
Sauron, the creator of the One Ring, is unambiguously evil, driven by a desire to impose his will and dominate all others. Yet, Tolkien’s message does not simply end with the idea that power should not rest in the hands of clearly evil tyrants, but rather penetrates much deeper into why centralized power by its very nature is too dangerous to exist.
One of the first characters to fall prey to the temptation of the Ring’s power is the wizard Saruman. Saruman’s reasoning for wanting power is quite simple and is certainly a sentiment that we hear everyday from the DC class. “The time of the Elves is over” he tells fellow wizard Gandalf, “but our time is at hand: the world of Men, which we must rule. But we must have power, power to order all things as we will, for that good which only the wise can see.” Such an attitude is all to common when it comes to the actual and aspiring members of the governing class who believe that they know best and are justified in imposing their kind hearted plans upon everyone else. Whether it is social democrats who believe they can plan the economy, or neo-conservatives who believe they can plan the entire world order and engage in “building” entire nations at the point of the gun in the Middle East, the world is full of wannabe Saruman’s fully convinced of their own wisdom and infallibility.
Tolkien examines in great psychological depth the process by which ordinary people end up abusing power, most poignantly in his creation of the Ring Wraiths; men who were once mighty kings who over time became subdued to Sauron’s will after accepting the nine rings of power gifted to men. Tolkien expert Dr. Thomas Shippey has said that “the Ringwraiths are Tolkien’s most original and distinctive image of evil” in part because they represent the danger that power poses in the hands of anyone, even oneself. Shippey calls this process by which ordinary people who begin with good intentions end up becoming corrupted and twisted as they acquire power the “wraithing process.” The use of the adjective “twisted” is quite intentional, as the word “wraith” stems from words such as wreath and writhe which are both twisted things. The etymology of “wraith” also draws upon the important element that wraiths are more defined by shape than by substance. According to Shippey, what fills this shape is ideology with power.
The suspicion is that people make themselves into wraiths. They accept the gifts of Sauron, quite likely with the intention of using them for some purpose which they identify as good. But then they start to cut corners, to eliminate opponents, to believe in some ‘cause’ which justifies everything they do. In the end the ‘cause’, or the habits they have acquired while working for the ‘cause’, destroys any moral sense and even any remaining humanity. The spectacle of the person ‘eaten up inside’ by devotion to some abstraction has been so familiar throughout the twentieth century as to make the idea of the wraith, and the wraithing-process, horribly recognizable, in a non-fantastic way.1
The dangers of the wraithing-process by which ordinary people end up becoming consumed by ideological power and committing atrocities are known all too well to anyone familiar with the bloody history of the 20th Century, a century in which, with bureaucratic efficiency, millions were exterminated in the ideological crusades of the USSR, Nazi Germany, and Communist China among others. According to Shippey, Tolkien’s portrayal of evil through the wraithing-process “is a curiously distinctive image of evil, and… a very unwelcome one because what it says is it could be you and under the right circumstances, or I should say the wrong circumstances, it will be you.”
While there is still much left to unpack from Tolkien’s prodigious body of work, one of his central theses is very clear: centralized power is too dangerous to be allowed to exist. If concentrated power exists people will be corrupted by it. This important point cannot be ignored in arguments for decentralization.
- 1. Shippey, Tom J.R.R. Tolkien: Author of the Century pg. 125