Point 5. Economic planning is based on the principle of autarky.

Autarky is the name given to the idea of economic self-sufficiency. Mostly this refers to the economic self-determination of the nation-state. The nation-state must be geographically huge in order to support rapid economic growth for a large and growing population.

This was and is the basis for fascist expansionism. Without expansion, the state dies. This is also the idea behind the strange combination of protectionist pressure today combined with militarism. It is driven in part by the need to control resources.

Look at the wars in Iraq, Afghanistan, and Libya. We would be supremely naive to believe that these wars were not motivated in part by the producer interests of the oil industry. It is true of the American empire generally, which supports dollar hegemony.

It is the reason for the planned North American Union.

The goal is national self-sufficiency rather than a world of peaceful trade. Consider, too, the protectionist impulses of the Republican ticket. There is not one single Republican, apart from Ron Paul, who authentically supports free trade in the classical definition.

From ancient Rome to modern-day America, imperialism is a form of statism that the bourgeoisie love. It is for this reason that Bush’s post-9/11 push for the global empire has been sold as patriotism and love of country rather than for what it is: a looting of liberty and property to benefit the political elites.

6. Government sustains economic life through spending and borrowing.

This point requires no elaboration because it is no longer hidden. There was stimulus 1 and stimulus 2, both of which are so discredited that stimulus 3 will have to adopt a new name. Let’s call it the American Jobs Act.

With a prime-time speech, Obama argued in favor of this program with some of the most asinine economic analysis I’ve ever heard. He mused about how is it that people are unemployed at a time when schools, bridges, and infrastructure need repairing. He ordered that supply and demand come together to match up needed work with jobs.

Hello? The schools, bridges, and infrastructure that Obama refers to are all built and maintained by the state. That’s why they are falling apart. And the reason that people don’t have jobs is because the state has made it too expensive to hire them. It’s not complicated. To sit around and dream of other scenarios is no different from wishing that water flowed uphill or that rocks would float in the air. It amounts to a denial of reality.

Still, Obama went on, invoking the old fascistic longing for national greatness. “Building a world-class transportation system,” he said, “is part of what made us an economic superpower.” Then he asked, “We’re going to sit back and watch China build newer airports and faster railroads?”

Well, the answer to that question is yes. And you know what? It doesn’t hurt a single American for a person in China to travel on a faster railroad than we do. To claim otherwise is an incitement to nationalist hysteria.

As for the rest of this program, Obama promised yet another long list of spending projects. Let’s just mention the reality: No government in the history of the world has spent as much, borrowed as much, and created as much fake money as the United States. If the United States doesn’t qualify as a fascist state in this sense, no government ever has.

None of this would be possible but for the role of the Federal Reserve, the great lender to the world. This institution is absolutely critical to US fiscal policy. There is no way that the national debt could increase at a rate of $4 billion per day without this institution.

Under a gold standard, all of this maniacal spending would come to an end. And if US debt were priced on the market with a default premium, we would be looking at a rating far less than A+.

Point 7. Militarism is a mainstay of government spending.

Have you ever noticed that the military budget is never seriously discussed in policy debates? The United States spends more than most of the rest of the world combined.

And yet to hear our leaders talk, the United States is just a tiny commercial republic that wants peace but is constantly under threat from the world. They would have us believe that we all stand naked and vulnerable. The whole thing is a ghastly lie. The United States is a global military empire and the main threat to peace around the world today.

To visualize US military spending as compared with other countries is truly shocking. One bar chart you can easily look up shows the US trillion-dollar-plus military budget as a skyscraper surrounded by tiny huts. As for the next highest spender, China spends 1/10th as much as the United States.

Where is the debate about this policy? Where is the discussion? It is not going on. It is just assumed by both parties that it is essential for the US way of life that the United States be the most deadly country on the planet, threatening everyone with nuclear extinction unless they obey. This should be considered a fiscal and moral outrage by every civilized person.

This isn’t only about the armed services, the military contractors, the CIA death squads. It is also about how police at all levels have taken on military-like postures. This goes for the local police, state police, and even the crossing guards in our communities. The commissar mentality, the trigger-happy thuggishness, has become the norm throughout the whole of society.

If you want to witness outrages, it is not hard. Try coming into this country from Canada or Mexico. See the bullet-proof-vest-wearing, heavily armed, jackbooted thugs running dogs up and down car lanes, searching people randomly, harassing innocents, asking rude and intrusive questions.

You get the strong impression that you are entering a police state. That impression would be correct.

Yet for the man on the street, the answer to all social problems seems to be more jails, longer terms, more enforcement, more arbitrary power, more crackdowns, more capital punishments, more authority. Where does all of this end? And will the end come before we realize what has happened to our once-free country?

Point 8. Military spending has imperialist aims.

Ronald Reagan used to claim that his military buildup was essential to keeping the peace. The history of US foreign policy just since the 1980s has shown that this is wrong. We’ve had one war after another, wars waged by the United States against noncompliant countries, and the creation of even more client states and colonies.

US military strength has led not to peace but the opposite. It has caused most people in the world to regard the United States as a threat, and it has led to unconscionable wars on many countries. Wars of aggression were defined at Nuremberg as crimes against humanity.

Obama was supposed to end this. He never promised to do so, but his supporters all believed that he would. Instead, he has done the opposite. He has increased troop levels, entrenched wars, and started new ones. In reality, he has presided over a warfare state just as vicious as any in history. The difference this time is that the Left is no longer criticizing the US role in the world. In that sense, Obama is the best thing ever to happen to the warmongers and the military-industrial complex.

As for the Right in this country, it once opposed this kind of military fascism. But all that changed after the beginning of the Cold War. The Right was led into a terrible ideological shift, well documented in Murray Rothbard’s neglected masterpiece The Betrayal of the American Right. In the name of stopping communism, the right came to follow ex-CIA agent Bill Buckley’s endorsement of a totalitarian bureaucracy at home to fight wars all over the world.

At the end of the Cold War, there was a brief reprise when the Right in this country remembered its roots in noninterventionism. But this did not last long. George Bush the First rekindled the militarist spirit with the first war on Iraq, and there has been no fundamental questioning of the American empire ever since. Even today, Republicans elicit their biggest applause by whipping up audiences about foreign threats, while never mentioning that the real threat to American well-being exists in the Beltway.

Regards,

Llewellyn H. Rockwell Jr.,
for The Daily Reckoning

The Eight Marks of Fascist Policy, Part II originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas. Recently Agora Financial released a video titled "What Causes Gas Price to Increase?".

After reviewing this long history, John T. Flynn proceeds to sum up with a list of eight points he considers to be the main marks of the fascist state.

As I present them, I will also offer comments on the modern American central state.

Point 1. The government is totalitarian because it acknowledges no restraint on its powers.

This is a very telling mark. It suggests that the US political system can be described as totalitarian. This is a shocking remark that most people would reject. But they can reject this characterization only so long as they happen not to be directly ensnared in the state’s web. If they become so, they will quickly discover that there are indeed no limits to what the state can do. This can happen boarding a flight, driving around in your hometown, or having your business run afoul of some government agency. In the end, you must obey or be caged like an animal or killed. In this way, no matter how much you may believe that you are free, all of us today are but one step away from Guantanamo.

As recently as the 1990s, I can recall that there were moments when Clinton seemed to suggest that there were some things that his administration could not do. Today I’m not so sure that I can recall any government official pleading the constraints of law or the constraints of reality to what can and cannot be done. No aspect of life is untouched by government intervention, and often it takes forms we do not readily see. All of healthcare is regulated, but so is every bit of our food, transportation, clothing, household products, and even private relationships.

Mussolini himself put his principle this way: “All within the State, nothing outside the State, nothing against the State.” He also said: “The keystone of the Fascist doctrine is its conception of the State, of its essence, its functions, and its aims. For Fascism the State is absolute, individuals and groups relative.”

I submit to you that this is the prevailing ideology in the United States today. This nation, conceived in liberty, has been kidnapped by the fascist state.

Point 2. Government is a de facto dictatorship based on the leadership principle.

I wouldn’t say that we truly have a dictatorship of one man in this country, but we do have a form of dictatorship of one sector of government over the entire country. The executive branch has spread so dramatically over the last century that it has become a joke to speak of checks and balances. What the kids learn in civics class has nothing to do with reality.

The executive state is the state as we know it, all flowing from the White House down. The role of the courts is to enforce the will of the executive. The role of the legislature is to ratify the policy of the executive.

Further, this executive is not really about the person who seems to be in charge. The president is only the veneer, and the elections are only the tribal rituals we undergo to confer some legitimacy on the institution. In reality, the nation-state lives and thrives outside any “democratic mandate.” Here we find the power to regulate all aspects of life and the wicked power to create the money necessary to fund this executive rule.

As for the leadership principle, there is no greater lie in American public life than the propaganda we hear every four years about how the new president/messiah is going to usher in the great dispensation of peace, equality, liberty, and global human happiness. The idea here is that the whole of society is really shaped and controlled by a single will — a point that requires a leap of faith so vast that you have to disregard everything you know about reality to believe it.

And yet people do. The hope for a messiah reached a fevered pitch with Obama’s election. The civic religion was in full-scale worship mode — of the greatest human who ever lived or ever shall live. It was a despicable display.

Another lie that the American people believe is that presidential elections bring about regime change. This is sheer nonsense. The Obama state is the Bush state; the Bush state was the Clinton state; the Clinton state was the Bush state; the Bush state was the Reagan state. We can trace this back and back in time and see overlapping appointments, bureaucrats, technicians, diplomats, Fed officials, financial elites, and so on. Rotation in office occurs not because of elections but because of mortality.

Point 3. Government administers a capitalist system with an immense bureaucracy.

The reality of bureaucratic administration has been with us at least since the New Deal, which was modeled on the planning bureaucracy that lived in World War I. The planned economy — whether in Mussolini’s time or ours — requires bureaucracy. Bureaucracy is the heart, lungs, and veins of the planning state. And yet to regulate an economy as thoroughly as this one is today is to kill prosperity with a billion tiny cuts.

This doesn’t necessarily mean economic contraction, at least not right away. But it definitely means killing off growth that would have otherwise occurred in a free market.

So where is our growth? Where is the peace dividend that was supposed to come after the end of the Cold War? Where are the fruits of the amazing gains in efficiency that technology has afforded? It has been eaten by the bureaucracy that manages our every move on this earth. The voracious and insatiable monster here is called the Federal Code that calls on thousands of agencies to exercise the police power to prevent us from living free lives.

It is as Bastiat said: the real cost of the state is the prosperity we do not see, the jobs that don’t exist, the technologies to which we do not have access, the businesses that do not come into existence, and the bright future that is stolen from us. The state has looted us just as surely as a robber who enters our home at night and steals all that we love.

Point 4. Producers are organized into cartels in the way of syndicalism.

Syndicalist is not usually how we think of our current economic structure. But remember that syndicalism means economic control by the producers. Capitalism is different. It places by virtue of market structures all control in the hands of the consumers. The only question for syndicalists, then, is which producers are going to enjoy political privilege. It might be the workers, but it can also be the largest corporations.

In the case of the United States, in the last three years, we’ve seen giant banks, pharmaceutical firms, insurers, car companies, Wall Street banks and brokerage houses, and quasi-private mortgage companies enjoying vast privileges at our expense. They have all joined with the state in living a parasitical existence at our expense.

This is also an expression of the syndicalist idea, and it has cost the US economy untold trillions and sustained an economic depression by preventing the postboom adjustment that markets would otherwise dictate. The government has tightened its syndicalist grip in the name of stimulus.

Regards,

Llewellyn H. Rockwell Jr.,
for The Daily Reckoning

The Eight Marks of Fascist Policy originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas. Recently Agora Financial released a video titled "What Causes Gas Price to Increase?".

The arrogance reminds me of George Bush after 9-11, who similarly believed that history owed him a gargantuan war in the tradition of FDR. And look how that arrogance led to disgrace and loss, as he unwittingly presided over the destruction of American prosperity while searching for bugbears abroad.

It just goes to show you that the presidency is something like a drug. It makes people lose all connection to reality. Part of the reality that Obama needs to recognize is that the New Deal was a calamity far worse than the initial market downturn that began it. He needs to stop basing his policies on dumbed-down civics texts versions of events and consider the economic logic.

With his rhetoric and policies, he has decided to demonize private enterprise, just as FDR did, as a way to present government as the great savior. Now, think about this. If there is a way out of the recession, it will have to be provided by private enterprise. It will come by new businesses, business expansions, entrepreneurship, new technology, and this will be the source of lasting jobs and prosperity.

You cannot make a country rich by looting taxpayers and paying people to pound nails into siding at public schools! These activities amount to capital consumption. They are not sources of investment. You can say that they are stupid tasks or wonderful tasks, but it is not a matter of ideology as to whether such public projects will make us all wealthier. They will not. They drain the sources of wealth from society. They represent a cost, not a blessing.

That was also true of Bush’s dumb stimulus program. He was only bailing out his friends at our expense. The effect was to give a little longer life to institutions that were failing anyway. It’s pathetic that the Republicans ever went along with it. You will notice that the scheme didn’t actually work.

Well, Obama is doing the same thing, though rewarding a different set of friends. This is not wealth production. This is wealth consumption. Do enough of this nonsense and you can destroy the livelihoods of an entire generation.

Americans are proud of their system of government, but consider what it has given us this time around. We had an outgoing president who thought it was his right to grab as much as he could while leaving. Now we have a new president who thinks that the election entitled him to grab as much as he can, right from the beginning. We get looted by the state coming and going. It all amounts to one massive war on prosperity and freedom.

Particularly culpable here are the official historians who have for generations heralded FDR as the great savior. It is a case study in how a civic lie can appear and fester for decades. The fact is that the New Deal did not work. It prolonged what might have been a troubling two-year downturn into a horrifying blow to world prosperity that ended up in a war that killed countless millions. It was one of the greatest acts of wreckage in world history.

And Obama is inspired by this? He wants to repeat it?

I’m not so cynical about human affairs that I believe that errors must be endlessly repeated. Obama can put a stop to his madness. He needs to know – someone must tell him frankly and openly – that his current path is going to lead not to recovery, but to an extension of suffering, and untold amounts of it.

The biggest threat facing the American economy right now is rarely even discussed. It is the massive buildup of paper bank reserves in the last quarter of 2008. This was Bush’s doing. He ordered the Fed to print like mad. Fortunately for us, the banks are still holding on to these reserves. When they start lending again, the result could be hyperinflation of Confederate-dollar proportions.

Hence the priority of the Obama administration should be to first do no evil, and second to find some means for withdrawing those reserves from the banking system before they wash through the economic structure and destroy the dollar. There is still time. He must act. Yes, that will lead to bank failures. That’s good! It will lead to business failures. That’s good and essential too.

There simply is no choice. If he acts now, he could find that recovery will come before his second term. This is precisely what happened with Reagan. He was fortunate to have advisers who insisted that he let the liquidation happen rather than attempt to fix the recession of 1981-82 with huge new government spending programs.

In any case, the hardest work to do here is intellectual. Obama’s head is filled with myths and lies, not only about FDR and the New Deal but also about the government’s power to repair the existing economic problems. With this model in his head, he can only do evil. This must change.

Nothing is inevitable. He can turn on a dime. The main message: do not repeat the actions of FDR, lest you destroy what is left of American liberty and prosperity.

Obama’s Wealth Destruction originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas. Recently Agora Financial released a video titled "What Causes Gas Price to Increase?".

One ingredient was financial intelligence. Madoff had buckets of it. Early in his career, he was the real deal, an actual innovator. He combined this with an amazing lack of conscience, for his scam was rooted most fundamentally in lying and stealing. The difference between him and all who came before was his grand scale, the grandest scale imaginable.

There is a saying in the world of Austrian economics about the business cycle. The puzzle is not to explain business failures. Those are part of the normal course of life, and the sign of a healthy economy. The puzzle is to explain the “cluster of errors” that appears at the beginning of a recession. How could so many have been so wrong about so much at the same time? The business cycle is a system-wide failure, not merely the mistaken judgment of a few.

So it is with Modoff’s scheme. The mystery isn’t how one person was able to fool a few. The scheme in which yesterday’s “investors” are paid off with the money of today’s victims is known in all places and probably all times – and it always goes belly up to the originator’s complete disgrace. It is a classic example of how moral laws are self-enforcing in the world of economics.

The critical difference this time is that Madoff ran his scheme during an economic boom, a time when people’s normal sense of incredulity is put on the shelf. This is part of the grave cultural distortion introduced by funny money. Money is the most widely demanded good in society, and the Fed is making new quantities of it not as a reflection of new real wealth, but purely as an administrative decree.

There is a sense in which funny money literally drives everyone crazy, leading to what is sometimes called the “madness of crowds.” Guido Hulsmann explains it all in his remarkably timely and revealing new book: The Ethics of Money Production. With artificial stimulation from the credit machine, multitudes are willing to believe in something that cannot possibly be true. In Madoff’s case, it was that he could, even in falling markets, earn 15-20% a year without risk.

Why not? Most everyone believed in some version of the myth. We believed that house prices would go up and up despite the reality that houses are physical things that deteriorate from the instant they are finished, just like cars or computers or anything else. Why did we believe this about houses? Again, you have to look to the fraudulent money system to see why.

And we believed that we could all become millionaires by putting our money in the stocks of companies that weren’t actually earning money or paying dividends, companies whose wealth was entirely based on infusions of cash from the stock market which in turn were based on the belief that others would buy the stocks and so on. In other words, we believed that something out of nothing was possible, and anyone who didn’t believe it was a chump. It’s exactly what people believed during the other great inflations of history.

What’s more, we believed that buying these stocks constituted not consumption, but savings for the future. In fact, people routinely attacked official savings data on grounds that they did not include what people were “saving” in terms of their stock market accounts. In a similar way, people were measuring our national wealth not in terms of accumulated capital, but rather through consumption data, as if granite kitchen counters in bigger houses were a measure of wealth instead of the opposite: the depletion of wealth.

The left is big on attacking the salaries of investment bankers, and they were indeed outlandish. But these too represented not a unique problem, but more evidence of inflationary finance. In a bubble economy, the money chases what is most fashionable, and financial services qualified. So the salaries were market. What was wildly distorted was the market itself.

Now let’s talk about government finance during these years. The market tried to correct itself from 1999-2001, but the government wouldn’t tolerate it. Instead, it used every sign of downturn as an excuse to keep the illusion going, creating billions and billions in new dollars. The Fed drove interest rates lower and lower despite the non-existence of savings available to back them up.

(Low interest rates in a sound money system are a reflection of accumulated capital and deferred consumption. When you see the Fed pushing them down during a boom, it is creating a dangerous mirage.)

Did anyone stop and wonder where the government was getting all this money to pump up the system? Yes, the Austrian economists warned us. The pages of Mises.org and LewRockwell.com were filled with alarms. But it was something people wanted to ignore. We are talking about human nature: the desire to believe in things that do not exist. The government was happy to fuel this sense because it gave the Fed, its connected industries, and the state more power and more money in the short term.

Madoff’s scheme played into the belief that wealth was not something to work for, but something to scheme for. It could be generated by playing your cards right, hooking into the right networks, and finding the right “investments.” The people with whom he dealt had, it turns out, some internal sense that there was something a little bit shady about the whole operation. But they dispensed with this sense when the fat checks arrived, and concluded that whatever was making this perpetual motion machine operate, it did work.

But listen: the government right now is using the same tactic to convince you that it is saving you from the recession. The whole scheme partakes of the same sense of denying reality that characterized Madoff’s scheme. And I’m not just talking about Social Security, which is almost an exact replica of the Ponzi version, except that at least Charles Ponzi didn’t force people to give him money. I’m speaking of something broader. The entire financial system that is propped up by the Treasury and the Fed is based on the same idea: that something out of nothing is possible.

So they will jail Madoff. Wall Street would flog him if it could. He is disgraced for all of history. But meanwhile, the likes of Bush, Bernanke, Paulson, Obama, and all the rest are still riding high, even though their scheme is far larger and more egregious.

Most of us like to believe that we wouldn’t have been tricked by Madoff. But are you being tricked by the elites who claim that they can conjure up a trillion dollars to stabilize our economy by clicking a few buttons on a computer screen? Most people are. Certainly the press seems to have bought it. Many people were outwitted by Madoff. Many more people are today being outwitted by the government and its central bank. And it will all end in disgrace and disaster, only on a far, far grander scale.

Regards,

Llewellyn H. Rockwell
for The Daily Reckoning
December 24, 2008

A very short reckoning today…

Not that there isn’t a lot to reckon with. Never have we seen so many absurdities…such remarkable events…such sublimely moronic thinking – in such a short time! When we want to make fun of something, we’re paralyzed…spoiled for choice.

But first, let us look at the basic facts.

Yesterday, the Dow shed another 98 points. The dollar held steady at $1.39 per euro. Gold lost $9, bringing it back to about where it began the year.

It is amazing to us that so many people have so much faith in so much humbug.

We’re talking about the bailout…the fix…the save…the plan to revive the world economy by giving it more of what it least needs – more debt. The idea is to make the pain of the correction go away by encouraging people to act as though they had nothing to correct. They’ve borrowed too much. And they’ve spent too much. But the feds aim to make them borrow more – by bringing the cost of borrowing down to an all-time low – and make them spend more…by causing prices to rise. (When money loses its value…they’ll be glad to get rid of it.)

It’s a consumer economy, they say; all we’ve got to do is to lure people to consume. The simpletons.

Colleague Simone Wapler explains that it doesn’t work that way:

“Of course, a consumer economy requires consumption, but that’s not all it requires. Imagine an island where a fisherman, a hairdresser, a doctor and a central banker live. The fisherman sells his fish. The hairdresser cuts hair. And the doctor does whatever doctors do. They all live on their services, using shells for money. The population is stable; everybody does what he’s supposed to do. Everyone is fed. They all have nice haircuts. And they all get medical treatment. The number of shells is stable too. That’s all there is to the story.”

Simone gores on to explain that the only way people can get their hair cut two times a day…eat twice as many fish…or get sick more often and expect to get the same treatment they got before is by INCREASING PRODUCTION. And that requires saving…and investment. Otherwise, increasing consumption isn’t possible. Even if you add more shells, the productive capacity remains the same.

We don’t even know why we are pointing this out. Every fool knows it. But every fool also believes that if you mix in a little macro-economic mumbo jumbo that, somehow, central bankers can increase consumption by discouraging saving…and just getting more shells into consumers’ hands.

The whole thing is as preposterous as the bubble that went before it.

But that doesn’t make it unpopular!

And since it’s Christmas Eve…and since we’re waiting in the Limoges airport for our two daughters to arrive…

…and since we see them coming out now…

We’re going to sign off…

…wishing you a Merry Christmas, Happy Hanukah…Joyeuses Fetes…Feliz Navidad…Super Kwanza…whatever…

And since France Telecom seems to have cut off our phone service…we will not be able to reckon tomorrow…

Madoff as Metaphor originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas. Recently Agora Financial released a video titled "What Causes Gas Price to Increase?".