A wonderful new book about Austrian economics for the layman

Blind Robbery! How the Fed, Banks, and Government Steal Our Money

by Andreas Marquart and Philipp Bagus

Reviewed by Patrick Barron

 

The purpose of this book is nothing less than to foment a revolt against the economic and monetary status quo, which, if continued, will destroy civilization as we know it. Yes, that is a big task, but Misters Marquart and Bagus may have accomplished just that. They have given us, in a relatively short book written in a conversational style for the layman, a comprehensive explanation of how an economy really works and why our current, central bank dominated system is destroying the productive sector of Western economies, transferring wealth from the masses to the politically connected few, and which, if continued, is bound to fail spectacularly so. But Marquart and Bagus are optimistic that the layman can understand the hidden forces at work and lobby to change them for the better. Champions of the Austrian School of Economics, which many economists believe may be too difficult for the layman to understand, these worthy gentlemen have given us a treatise that brings all the elements of that school of thought together in a book that can be read and understood by those completely unversed in economic theory of any kind . They start by employing the device of considering a fictitious town that has no medium of exchange; i.e., it is an economy based on barter. From this humble start, we learn how money arises naturally as part of the market in order to solve the limitations of a barter economy. We learn that only commodity money would be chosen by the market. We learn how bankers collude with governments to destroy commodity money for their own gains, which leads to a marvelous explanation of business cycle theory that arises as a result thereof. The “blind robbery” of the catchy title refers to the inflation of the money supply by government and the banks, which leads not only to the boom-bust cycle but also to the more hidden loss of money’s purchasing power over time. But the loss of money’s purchasing power is a boon for government spending and those who are that spending stream’s recipients, mainly the military, Wall Street insiders, and welfare recipients. Perhaps the most innovative part of the book is the way the authors weave in an explanation of the steady corruption of society’s sober, hardworking culture, a sure fire death by a thousand cuts.

 

Read this book! Pass it along! Donate copies to schools and libraries! Let’s start the revolution!

 

Blind Robbery may be purchased here.

 

Or copy this link into your browser:

 

http://store.mises.org/Blind-Robbery-How-The-Fed-Banks-And-Government-Steal-Our-Money-P11031.aspx

 

 

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The real lesson of Brexit

The Real Lesson of Brexit

by Patrick Barron

 

Following the surprise vote by the UK to leave the European Union, most commentators are trying to understand the rationale behind the British vote. Let me be a contrarian and ask, why does it matter? Undoubtedly there is no single reason that millions of British citizens voted the way they did. Furthermore, there is no objective way of determining whether or not leaving really is advantageous for Britain, although most mainstream media are wringing their hands that the British vote was “wrong”. The real lesson of Brexit is that the British citizenry exercised their sovereign right in a fair, democratic referendum and chose to change the way they are governed. This lesson is not being lost of the rest of Europe’s citizenry, who now are energized to get binding referendums on the ballots of their own countries.

 

The fact is that the European Union is NOT a sovereign entity. In fact Britain itself–and by extension, all the rest of the EU’s member states–are not ultimate sovereign entities either. The individual citizen is sovereign. THIS is the lesson of Brexit. THIS is the lesson that the British have given to the citizenry of Europe: i.e., that they CAN leave the EU after all, because they are the true sovereign entities.

 

Compared to the rest of Europe, the question of whether British citizens had a right to a Remain/Leave referendum was never very controversial. Through various venues the people were demanding a vote. To his credit Prime Minister David Cameron announced that he agreed, even though he desired that Britain stay in the EU and campaigned for this result. He even gave his cabinet members the freedom to campaign as their conscience demanded. When the Leave side won, he forthrightly stepped down. This example of statesmanship reminds me of what was said of the traitorous Thane of Cawdor in Shakespeare’s Macbeth, that “Nothing in his life became him like the leaving it.”

 

And what of the rest of Europe? Well, implicitly even the EU elite have accepted the British decision, although they are not above trying to modify it in ways to ensure that Britain still pays into the EU’s coffers. The last time I checked there were no reports of EU invasion barges arriving at ports in Calais, preparing for a modern Norman or Nazi invasion. There have been no reports of British subjects being arrested, their assets confiscated, and being imprisoned or expelled from the Continent. The biggest threat seems to be that the EU will erect high tariffs against British goods and restrictions on British financial services. Oh, the Humanity! If the new British government were wise– which is highly unlikely!– it would declare unilateral free trade and ignore the threats. The EU may indeed take such action, but it would harm its own citizens to just as great an extent as British citizens. Trade restrictions harm both countries, whose individual citizens wish to trade in order to better their lives.

 

But, again, this is NOT the main point. It is impossible and irrelevant to tally gains and losses when one country bars trade with another. The main point of the Brexit referendum has always been that the British people have a right to change their form of government in a peaceful manner. I fully expect that the citizenry of other EU countries will do what is necessary to get their own Remain/Leave referendums on their respective national ballots. Their task will not be as easy as that of the British, but now that they have seen that it can be done there is little doubt that more such referendums will follow. Whether their citizens decide to Remain or Leave, the big winner will be the reaffirmation of the peoples’ right to self government.

 

 

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Wrong solution to a misunderstood problem

From today’s Open Europe news summary:

Business Secretary says growth must take priority over deficit as Carney warns Brexit risks beginning to ‘crystallise’

Bank of England Governor Mark Carney yesterday warned that the financial risks of Brexit “have begun to crystallise” and relaxed rules on banking capital, with the aim of releasing as much as £150bn in possible loans. The heads of Barclays, Lloyds Banking Group, Royal Bank of Scotland, HSBC, Santander, Nationwide Building Society, Metro Bank and Virgin Money signed a joint statement that they would “make the extra capital available to support lending to UK businesses and households in this challenging time”. Carney said that the resilience of the UK financial system could be seen in the fact that “overall bank funding costs have not increased”.
Meanwhile, in an interview with The Financial Times, Business Secretary Sajid Javid said the focus now was on “more economic growth”, suggesting that the combination of a downturn and a new fiscal stimulus could cause the budget deficit to rise from 3% of GDP to 5%. He called for corporate and personal tax cuts. Three UK commercial property funds worth about £10 billion pounds suspended trading and redemptions yesterday as investors sought to remove their cash. The pound this morning dropped to 31-year low against the US dollar and its lowest level against the euro since 2013.

Source: Bank of England The Financial Times The Wall Street Journal: Boleat The Financial Times 2 Politico The Times

Bank of England Governor Mark Carney, the heads of major UK banks, and Business Secretary Sajid Javid propose more money printing and more debt for an economy already awash in both and which has led to no discernible benefit except to the pay packets for executives and government bureaucrats. Brexit is an opportunity to shirk off not only the discredited policies of Brussels but also the discredited Keynesian policies advocated by the London establishment. The UK DOES need to reduce its budget deficit. Like any household, government must live within its means and stop confiscating the nation’s resources through the subterfuge of money printing. Only through sound money and honest borrowing will the electorate be able to decide if it wants to continue to pay for pie-in-the-sky welfare programs and military adventurism. It would be a cruel mistake to use Brexit as a pretense for even more money printing and more uncollectible debt. The path to prosperity is through hard work and savings, not the Bank of England’s money printing press.

Patrick Barron

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My letter to the Philadelphia Inquirer in defense of Brexit

Dear Sirs:
Trudy Rubin claims that “Brexit would be a huge step backward”, but she never explains why. Oh, she does correlate the growth of the EU regulatory state with the collapse of the Soviet Union, but this is not cause-and-effect. The Soviet Union collapsed because NATO stood guard over the Western democracies until the internal cancer of communism had destroyed the Russian economy. Even Ms. Rubin admits that Europeans resent its (the EU’s) massive bureaucracy, myriad regulations, financial disasters, and open border policies. Furthermore, she admits that Brexit probably would lead to the dismantling of the EU. Is this not democracy in action? The Europeans, of all people, understand the dangers of large, undemocratic, centralized, bureaucratic states, of which the EU is just the latest incarnation.

Patrick Barron

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Puerto Rico needs better advisors

Re: House passes bill to restructure Puerto Rico’s $70 billion debt

The US House of Representatives has passed a bill to appoint a special commission to restructure and renegotiate Puerto Rico’s unsustainable debt. The hubris of Congress that it and its appointed commissioners have superior knowledge regarding public finance is farcical. It is widely reported that Puerto Rico’s debt is $70 billion. With a population of 3.7 million, Puerto Rico’s per capital debt is around $19,000. US debt is widely reported to be $10 trillion. With a population of around 300 million, US per capita debt is around $33,000. I suggest that Puerto Rico hire better advisors, preferably German, since Germany is running a balanced budget.

Patrick Barron

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Trade negotiations are not necessary

From today’s Open Europe news summary:

WTO chief warns of “complex and drawn-out” trade negotiations after Brexit

Roberto Azevêdo, Director-General of the WTO, has warned that it could take Britain decades to disentangle its trading relations with the EU and negotiate new ties with the rest of the world after Brexit. He told The Times, “It seems that there is a great deal of confusion about the trade implications of a British exit from the EU. I think it’s important to provide the facts. The likelihood is that a British exit would lead to a sequence of complex negotiations – with the EU itself, with the 58 countries that have trade agreements with the EU, and also with all the other members of the WTO. These negotiations would be complex and drawn-out.”
Meanwhile, Prime Minister David Cameron said yesterday that leaving the EU would cause an immediate shock, then uncertainty, and negatively impact trade. Boris Johnson said the risks of remaining in the EU are “massive”, due to the Eurozone and migrant crises.

Source: The Times The Sun Institute for Fiscal Studies The Daily Telegraph: Hague

No so-called trade negotiations are needed. The idea that a nation must seek the approval and reciprocity in order to lower or completely eliminate barriers to trade is one of the most persistent myths in all of economics. It is akin to believing that one cannot start a diet until everyone else starts a diet. Lowering barriers to trade does not require the cooperation of any other nation. All a nation has to do is unilaterally eliminate all barriers to foreign products. Such an action will lower the cost of living for the citizens of the importing country. Of course, these imports will be paid with currency of the importing country. And what is the exporting country to do with this currency? It has a choice. It can spend the currency on imports from the country that issued the currency . It can invest in the country that issued the currency. Or it can hold the currency as foreign reserves, to be spent later. Now, how is any of this a problem for the country that eliminated barriers to trade?

Scrap all the trade agreements currently in force. Send the trade negotiators home. Declare unilateral free trade. This is the path to peace and prosperity.

Patrick Barron

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Another reason for Europe to get rid of the euro

From today’s Open Europe news summary:

European Commission considering new tools to prevent cash outflows from failing banks

According to a document seen by the Financial Times, the European Commission is considering proposing a new ‘moratorium tool’ that would give national regulators the power to freeze payments to bondholders and potentially halt depositor withdrawals in order to prevent huge cash outflows from failing banks before national authorities can intervene.

Source: The Financial Times

This is the typical answer from the elite running the EU and the ECB. When their policies lead to failure, the people’s assets will be seized. In typical Orwellian New Speak fashion, such action will be hailed as the necessary and proper solution to the problem.

Patrick Barron

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My response to an email blast by Roger Helmer, member of the European Parliament

Per your recent email:

But the key point is that the UK is a massive importer (and net importer) of EU goods.  We will in fact be the EU’s largest export customer.  Bar none.  This is undesirable from a balance-of-payments point of view, but it gives us enormous negotiating clout.”

Dear Roger,
One of the greatest fallacies in all of economics is that buying more from one customer than he buys from you is a bad thing; i.e., a balance of payments/trade deficit. Unfortunately, you commit this error in your recent email blast, copied above. What are the EU countries to do with all those pounds that they accept in payment for vendible goods? They will buy something in Britain, maybe even British national debt. If they let the pounds stack up in their central banks as foreign reserves, all they have done is present a gift to the British people, similar to a merchant never cashing your check.

Warmest regards from an friend in the US,

Patrick Barron

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Is an Increase in German Exports a Good Thing for Germany?

From today’s Open Europe news summary:

German exports rise unexpectedly

German exports rose by 1.9% month-on-month in March 2016, according to new data released by the National Statistics Office (Destatis) yesterday. It was the largest monthly increase in half a year, and came as a surprise to analysts who did not expect any growth at all. Imports in March dropped by 2.3% to €80.9bn, leaving Germany with a trade surplus of €26bn.

Source: Reuters Deutschland Handelsblatt

A rise in German exports is seen as a positive development, but is it? What does Germany get in return for sending its products abroad, especially if it sends these products to other members of the Eurozone; i.e., that countries using the euro? It gets an increase in its euro-denominated credit at the European Central Bank, known as its TARGET2 balance. In other words, Germans work hard to produce real, vendible goods in exchange for a debased and depreciating currency.

Patrick Barron

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Another step toward cash confiscation in Europe

From today’s Open Europe news summary:

ECB to halt production of €500 note, but it will retain its value

The European Central Bank announced yesterday that it would stop printing the €500 note from the end of 2018 due to, “concerns that this banknote could facilitate illicit activities.” However, the bank confirmed that the note will always remain legal tender and will therefore continue to retain its value.

Source: ECB Press Release

Once cash has been eliminated, the ECB can implement its negative interest rate program on a large scale. In fact it probably doesn’t have to eliminate small bills, since it may be impractical and/or impossible for anyone to hold and use cash denominated in small bills for anything other than petty purchases.

Patrick Barron

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