During the past few weeks, Congress has been locked in a battle to pass a continuing resolution to fund government operations through September. Both supporters and opponents of the bill, HR 1, claim it is a serious attempt to reduce federal spending. However, an examination of the details of the bill call that claim into question. For one thing, the oft-cited assertion that HR 1 reduces spending by $99 billion is misleading. The $99 billion figure merely represents the amount that HR 1 reduces spending from the President’s proposed Fiscal Year 2011 budget - not reductions in actual spending. Trying to claim credit for a reduction in spending based on cuts in proposed spending is like claiming someone is following a diet because he had only five slices of pizza when he intended to have 10 slices!
In fact, HR 1 only reduces real federal spending by $66 billion compared to last year’s budget. This may seem like a lot to the average American but in the context of an overwhelming trillion-dollar budget and a national debt that could exceed 100 percent of GNP in September, it is barely a drop in the bucket.
One reason that HR 1 does not cut spending enough is that too many fiscal conservatives continue to embrace the fallacy that we can balance the budget without reducing spending on militarism. Until Congress realizes the folly of spending trillions pretending to impose democracy on the world we will never be able to seriously reduce spending.
Congress must not only reject the warfare state, it must also reject the welfare state. HR 1 is more aggressive in ending domestic spending than foreign spending, and does zero out some objectionable federal programs such as AmeriCorps. However, HR 1 leaves most of the current functions of the federal government undisturbed. This bill thus continues the delusion that we can have a fiscally responsible and efficient welfare state.
The failure to even attempt to address the serious threat the welfare-warfare state poses to American liberty and prosperity is the main reason why supporters of limited government and individual liberty ultimately should find HR 1 unsatisfactory. Only a rejection of the view that Congress can run the economy, run our lives, and run the world will allow us to make the spending reductions necessary to avert a serious financial crisis. This does not mean we should not prioritize and discuss how to gradually transition away from the welfare state in a manner that does not harm those currently relying on these programs. However, we must go beyond balancing the budget to transitioning back to a free society, and that means eventually placing responsibility for social welfare back in the hands of individuals and private institutions.
Despite the overheated rhetoric heard during the debate, HR 1 is a diversion from the difficult task of restoring constitutional government and a free economy and society. It is time for Congress to get serious about cutting spending, not merely tinkering around the edges of the proposed budget and kicking the can down the road for future generations. If we fail to act decisively now, there will soon come a time when both our money and our capacity to borrow will run out. When that happens, our ability to negotiate and play political games with spending priorities will be over. To avoid real chaos, the time to start dealing with our bloated government budget is right now.
Tuesday
CENTRAL ECONOMIC PLANNING AT ITS WORST
The Financial Crisis Inquiry Commission (FCIC) presented its results to the Financial Services Committee. As with most other politically-appointed commissions, the results of the FCIC's investigation were easy to predict. Established by the same congress that gave us national healthcare and with a majority of its members appointed by those who seek to solve every problem with more government intervention, it was no surprise that the commission's findings would favor increased government intervention in the economy. Minority members were not substantively involved in the commission's operations, and the commission attempted to exclude their dissenting views by granting them very limited space to do so.
However, even the minority members of the commission failed to consider the most important cause of the financial crisis, namely the Federal Reserve’s loose monetary policy. Almost a century ago, in 1912, Ludwig von Mises published his great work The Theory of Money and Credit. This was the first systematic description of Austrian Business Cycle Theory (ABCT), which explains the origins of the business cycle in monetary expansion. This theory explains why so many businessmen make so many of the same errors at the same time. Yet not a single member of the commission undertook an analysis of the financial crisis from an Austrian economic viewpoint.
Instead, blame was placed on failures in financial regulation and corporate governance, excessive borrowing and risky investments, and expansion of subprime lending, among other factors. But none of these explanations can answer why this crisis occurred. Why was there excessive borrowing? Why was there an explosion of subprime lending? Why were there failures in corporate governance? Why did virtually no one except Austrian economists see this coming?
Without the Federal Reserve's massive expansion of credit throughout the 1990s and early 2000s, there could have been no excessive borrowing or explosion of subprime lending. Through easy credit, the Fed initiated the economic boom that created the dot-com bubble. When that bubble burst the Fed pumped additional liquidity into the system, which led to a new boom that created the housing bubble. And now the Fed's additional trillions of dollars in monetary pumping is creating yet another bubble. This is the exact opposite of stability in the marketplace and has nothing to do with free markets. It is central economic planning at its worst.
It is imperative that the historic record accurately reflect what actually happened. In the popular press we see columnists attempting to blame the financial crisis on the “small-government,” “free-market” policies of President Bush. Hundreds of billions of dollars in stimulus payments, a $700 billion bailout program, and trillions of dollars of Federal Reserve credit facilities hardly represent small-government and free-market principles in action! On the contrary, these government interventions by both major parties demonstrate quite clearly our nation’s acceptance of crony capitalism.
Schoolchildren today are taught the myth that Herbert Hoover was a small-government President who did nothing to stop the Depression, while the truth is exactly the opposite. Fed Chairman Bernanke failed to understand the true cause of the Great Depression, so his policy prescriptions to combat the current crisis are understandably flawed. Unless we confront and correct false economic rhetoric, truly understand the causes of the economic crisis, and do away with our loose monetary policy, we will find ourselves in ever more vicious business cycles.
However, even the minority members of the commission failed to consider the most important cause of the financial crisis, namely the Federal Reserve’s loose monetary policy. Almost a century ago, in 1912, Ludwig von Mises published his great work The Theory of Money and Credit. This was the first systematic description of Austrian Business Cycle Theory (ABCT), which explains the origins of the business cycle in monetary expansion. This theory explains why so many businessmen make so many of the same errors at the same time. Yet not a single member of the commission undertook an analysis of the financial crisis from an Austrian economic viewpoint.
Instead, blame was placed on failures in financial regulation and corporate governance, excessive borrowing and risky investments, and expansion of subprime lending, among other factors. But none of these explanations can answer why this crisis occurred. Why was there excessive borrowing? Why was there an explosion of subprime lending? Why were there failures in corporate governance? Why did virtually no one except Austrian economists see this coming?
Without the Federal Reserve's massive expansion of credit throughout the 1990s and early 2000s, there could have been no excessive borrowing or explosion of subprime lending. Through easy credit, the Fed initiated the economic boom that created the dot-com bubble. When that bubble burst the Fed pumped additional liquidity into the system, which led to a new boom that created the housing bubble. And now the Fed's additional trillions of dollars in monetary pumping is creating yet another bubble. This is the exact opposite of stability in the marketplace and has nothing to do with free markets. It is central economic planning at its worst.
It is imperative that the historic record accurately reflect what actually happened. In the popular press we see columnists attempting to blame the financial crisis on the “small-government,” “free-market” policies of President Bush. Hundreds of billions of dollars in stimulus payments, a $700 billion bailout program, and trillions of dollars of Federal Reserve credit facilities hardly represent small-government and free-market principles in action! On the contrary, these government interventions by both major parties demonstrate quite clearly our nation’s acceptance of crony capitalism.
Schoolchildren today are taught the myth that Herbert Hoover was a small-government President who did nothing to stop the Depression, while the truth is exactly the opposite. Fed Chairman Bernanke failed to understand the true cause of the Great Depression, so his policy prescriptions to combat the current crisis are understandably flawed. Unless we confront and correct false economic rhetoric, truly understand the causes of the economic crisis, and do away with our loose monetary policy, we will find ourselves in ever more vicious business cycles.
Wednesday
RON PAUL'S 2011 CPAC SPEECH
This is hard core. He won 30%. Mitt Romney got 23%. The conservative wanne-be's were way behind. Not one of them got double digits. Palin got 3%. Huckabee got 2%.
* * * * * * * *
Thank you very much, thank you. Great to see you everybody, great to see you, I'm glad to see the revolution is continuing. Well, we have first seen some of the results of the revolution of a few years ago and that was last year's election, and understand we had a few new members sent to Congress, and we have you to thank you for. But I do want to take a moment to take a little special privilege and say, we also had a new Senator from Kentucky, and we like that too. So there's a lot of exciting things going on, there is truly a revolution going on in this country, and we've been dealing with this and encouraging it, because I do believe that we live in a time where we do need a change in attitude, a change in ideas. We don't need to just change the political parties, we need to change our philosophy about what this country is all about.
This past week, we had a pretty good victory for the Freedom Movement, we had a vote come up all of a sudden under suspension and it had to do with the PATRIOT Act, and the PATRIOT Act we know has nothing to do with patriotism, they always name it opposite of what it is. The PATRIOT Act is literally the destruction of the 4th Amendment, that's what it's all about. Now, the one thing in Washington they haven't quite understood is what's happening in grassroots America, because they assume that everybody loves the PATRIOT Act, we'll bring it up under suspension and pass it automatically. Well, we didn't get a majority vote but they didn't pass it automatically with a two thirds vote, sending a message that this country is waking up, and we want to protect our civil liberties as well as our economic liberties.
This week I was scheduled to be on a financial program, I've been on a few of those lately, talking about things like the Federal Reserve and a few other things. But I never got around to talking about this program this week about the Federal Reserve, because all of a sudden there was a speech to be given by Mubarak about his potential resignation, of course he resigned today. So that was the subject, but a lot of people now say, "What should our position be? What should our position be about finding the next dictator of Egypt?" And I would say "We need to do a lot less, a lot sooner, not only in Egypt but around the world.""
Some people want to argue about that and say we have a moral responsibility to spread our goodness around the world and it's our obligation to do this. But let me tell you, fiscal conservatives should look at this carefully, how much did we invest in that dictator over the past 30 years? $70 billion we invested in Egypt. And guess what? The government is crumbling and the people are upset, not only with their government by they're upset with us for propping up that puppet dictator for all those years. Now to add insult to injury, where do you think the money went? To a Swiss bank account! That family, the Mubarak family had 40, 50, 60 billion dollars -- nobody knows -- stashed away in other countries, of your money, that is true.
Then you know, it used to be the conservatives were against foreign aid. I'm still against foreign aid -- for everybody. Now I was saying that I used to describe foreign aid: "Foreign aid is taking money from the poor people of a rich country and giving it to the rich people of a poor country." And there can't be a better example of that than what we did with Egypt. We took money from you, made people poor, it contributed to our debt, billions and billions of dollars, and all we get is chaos from it and instability. There's nothing wrong with what the founders talked about. They talked about having friendships and trade and getting along with people and staying out of entangling alliances and the internal affairs of foreign nations when it's none of our business.
Now we've been doing it for a long time and you get periods of relative stability. There was relative stability when we were propping up the Shah, but it ended up with bad results, we ended up with the Ayatollah and now we have a problem on our hands. But all the Middle East is unstable because of this, now it's Tunisia, next it's Egypt and it's going to keep going because all the problems are there because the people don't like us propping up their dictators no more than we would like it if a foreign country came in here and propped up a dictator in our country. But the real danger is that this will most likely spread and when it gets to Saudi Arabia and there's disruption there, then you are going to see some real problems and it will be a partial consequence of our flawed foreign policy. Temporary stability does not guarantee stability that we need around the world. And besides, we just flat out don't have the money, and we shouldn't be doing it.
Just remember, the Soviet system did not collapse because we had to fight them, they collapsed for economic reasons. Guess where their final plunge was on their empire -- Afghanistan. So it makes no sense for us to think that we can keep troops in 135 countries, 900 bases and think we can do it forever. So no matter how badly you want us to do that, it's time to reassess that foreign policy. It's time for us to bring troops home. We've had troops in Japan since World War 2 and in Germany, why are we paying for their defense?
There's been a lot of talk about the budget deficit and that's something that I was concerned about just a few years back, like 1976, and that's why I haven't voted for any appropriation bills during that period of time either. But people are starting to recognize it's bad, we have to do something about it, we have to have a balanced budget amendment and all these things. But, unfortunately even in spite of the improvement in the Congress right now, we don't have the votes, which is tragic. It's going to continue, and we're going to continue to bail out, we're going to continue to spend the money, nobody wants to cut. I am sure that half the people in this room won't cut one penny on the military, and the military is not equated to defense. Defense spending is one thing, military spending is what Eisenhower called the "military-industrial complex" and we have to go after that.
But let's say government, as you all, I am sure would agree, is out of control, and it's very hard for us to get a handle on it. So let's say we even theoretically, and a miracle happens and we balance the budget where we are today, it would be still a disaster because we're spending too much money. But it wouldn't change a whole lot. When a crisis comes, guess what happens? Guess who does the bailing out? The Federal Reserve used $4 trillion to pass out without congressional approval and most people say "Oh, well that's the Federal Reserve's job to do that." No, it is our job to check up and find what the Federal Reserve has done, audit them, and find out who their buddies are that they're taking care of.
The Federal Reserve creates money out of thin air, they can loan to banks, central banks of the world, to other governments and international financial institutions and we're not even allowed to know. They resent the fact that when I ask these questions, that they don't have to give us information. That's why the bill to audit the Fed is the first step to ending the Federal Reserve. But the Federal Reserve will end itself because they will destroy the dollar. Since the Fed came into existence since 1913, they've eliminated 98% of the value of the 1913 dollar, and it's continuing erosion, they pumped at first when the crisis hit $1.2 trillion and another $600 billion and believe me, there is an economic law that says you just can't continue to do this. So Congress has responsibility, they should cut back, but Congress has a responsibility to protect the value of the currency and that means that we have the moral and the legal authority to put checks on the Federal Reserve system.
There's been a lot of talk about bipartisanship after election, we need bipartisanship, and in some ways that might be true, but I'll tell you what I think about it. I think and I believe that we have had way too much bipartisanship for about 60 years. We have bipartisanship on medical care. You say, "Yeah, the current administration is giving us bad medical care." But what is done on the other administration? We've been involved for a long time. It's the bipartisanship of the welfare system, the warfare system, the monetary system, the challenge to our civil liberties, it all goes through with support from both parties. So there's way too much bipartisanship. This should be a challenge of the issue of philosophy -- good philosophy versus bad philosophy.
And when you can agree on something you should make coalitions with whomever will agree with you and come together. But I'd like to see some bipartisanship though. What I would like to see is take those big government conservatives who love to spend money and never cut their efforts and their spending and get the big government liberals where they want to spend and never want to cut and let them get together and say "It's time, this deficit isn't good, let's have a little bit of bipartisanship and cut both."
There's been talk lately about American exceptionalism. Man we like to talk about that, I think we certainly live in an exceptional country, we have been blessed, it's been the greatest country, most freedom, most prosperity. My concern is I'm afraid we're losing it! I'm afraid we've given up on our devotion to liberty, that's where our problem is. But where I think we go astray on this exceptionalism is there are some people and sometimes they're referred as neoconservatives and they're sort of neo-Jacobins where they believe that we have this moral responsibility to use force to go around the world and say, "You will do it our way or else." Well force doesn't work, it never works.
The best way to get people to act more like us if we're doing a good job, is for us to have a sound economy, a sound dollar, treat people decently, have a foreign policy that makes common sense, treat people like we want to be treated, and then maybe they would want to emulate us and say, "Freedom does work and we ought to try it." But we can't force it on other people.
There's one general rule about what we should expect from government. The First Amendment is a great amendment, freedom of expression is protected. The government shall write no laws in reference to our freedom of expression. It doesn't say that we're to have an expression of only the noncontroversial ideas -- it's freedom of expression! Now, most people are pretty good on the First Amendment, but where they slip up is; they say "The government should write no laws about the freedom of activity," so the liberals want to talk about how to regulate your economic activity, how you spend your money, and others want to regulate your personal lifestyle, but government should not be regulating us and we should adapt one other principle for that to work. We should all swear off the use of violence against our neighbors, our friends, against other countries.
The purpose of all political activity from my view point is to promote liberty. Liberty is the most important element, liberty comes from our creator, it doesn't come from our government. If we have a free society, we can go about our business and do our very best work toward virtuous things and work toward excellence. When government takes over the role of making us virtuous and making us excellent and redistributing the wealth, they only do it at the expense of liberty, and that's why we're in such terrible shape today, it's because we've allowed the government to be so much involved. If you can't steal from your neighbor, you can't send the government to your neighbor to steal for you.
Government should never be able to do anything you can't do. If you can't steal from your neighbor, you can't send the government to your neighbor to steal for you. There should be no redistribution of wealth. The exciting things that are happening today and gets me energized is coming to events like this and meeting with the young people and going to the campuses and finding out what Young Americans for Liberty have done, and believe, me the ideas and the principles of liberty are alive and well in the next generation and there's every reason in the world for us to be optimistic about what's coming.
I would like to make one suggestion before I close; just to think about because it's not a perfect solution, but especially the young people. What if could, if I had the authority to do, what if I could offer you and say "Look, we're not doing such a good job in government these days, we make promises and we don't know about the future. But would you consider opting out of the whole system under one condition, you pay 10% of your income, but you take care of yourself, don't ask the government for anything." Tragically you're probably going to have the opportunity because government is in the process of failing and they can't deliver on the goods, just as the Soviets couldn't deliver the goods and maintain their empire, we will have those same problems domestically and we face serious economic problems as this dollar crisis evolves.
But let me close with comments from Sam Adams, he says "Don't worry about it if we're not a majority, all we need is a minority keen on spreading the brushfires of liberty in the minds of man." That is what we need to do and believe me, the brushfires are burning, they will not be able to squelch the brushfires, they're burning and they're spreading and people are getting excited, because they're starting to separate it out, what true liberty is all about, what market liberty, personal liberty is and what it means in foreign policy, what it means in our traditions, the American tradition, what it means because the Constitution confirms and confers with what I'm saying. There is no authority in the constitution to have a Federal Reserve system, no authority for the welfare state and no authority for the police state, it's not there. Defend liberty!
So we should all assume personal responsibility for promoting the ideals of liberty, and one thing that Samuel Adams always advised when they were in the dire consequences of the problems of the revolution, he said "We cannot present long faces to the people " --- at [...] at that time --- "because it will make them realize how tough things are." So we should not have long faces, we do not know exactly what tomorrow will bring, but I do know that the effort is worthwhile and I do know that you can have a lot of fun defending liberty, and believe me, if you understand liberty and realize it's the only humanitarian system that existed ever on mankind, I'll tell you what, if you learn about it study and know free market economics and fight for this, I can guarantee you, you will sleep better at night, you will enjoy your life and you will feel like you're doing something worthwhile. Defend liberty!
* * * * * * * *
Thank you very much, thank you. Great to see you everybody, great to see you, I'm glad to see the revolution is continuing. Well, we have first seen some of the results of the revolution of a few years ago and that was last year's election, and understand we had a few new members sent to Congress, and we have you to thank you for. But I do want to take a moment to take a little special privilege and say, we also had a new Senator from Kentucky, and we like that too. So there's a lot of exciting things going on, there is truly a revolution going on in this country, and we've been dealing with this and encouraging it, because I do believe that we live in a time where we do need a change in attitude, a change in ideas. We don't need to just change the political parties, we need to change our philosophy about what this country is all about.
This past week, we had a pretty good victory for the Freedom Movement, we had a vote come up all of a sudden under suspension and it had to do with the PATRIOT Act, and the PATRIOT Act we know has nothing to do with patriotism, they always name it opposite of what it is. The PATRIOT Act is literally the destruction of the 4th Amendment, that's what it's all about. Now, the one thing in Washington they haven't quite understood is what's happening in grassroots America, because they assume that everybody loves the PATRIOT Act, we'll bring it up under suspension and pass it automatically. Well, we didn't get a majority vote but they didn't pass it automatically with a two thirds vote, sending a message that this country is waking up, and we want to protect our civil liberties as well as our economic liberties.
This week I was scheduled to be on a financial program, I've been on a few of those lately, talking about things like the Federal Reserve and a few other things. But I never got around to talking about this program this week about the Federal Reserve, because all of a sudden there was a speech to be given by Mubarak about his potential resignation, of course he resigned today. So that was the subject, but a lot of people now say, "What should our position be? What should our position be about finding the next dictator of Egypt?" And I would say "We need to do a lot less, a lot sooner, not only in Egypt but around the world.""
Some people want to argue about that and say we have a moral responsibility to spread our goodness around the world and it's our obligation to do this. But let me tell you, fiscal conservatives should look at this carefully, how much did we invest in that dictator over the past 30 years? $70 billion we invested in Egypt. And guess what? The government is crumbling and the people are upset, not only with their government by they're upset with us for propping up that puppet dictator for all those years. Now to add insult to injury, where do you think the money went? To a Swiss bank account! That family, the Mubarak family had 40, 50, 60 billion dollars -- nobody knows -- stashed away in other countries, of your money, that is true.
Then you know, it used to be the conservatives were against foreign aid. I'm still against foreign aid -- for everybody. Now I was saying that I used to describe foreign aid: "Foreign aid is taking money from the poor people of a rich country and giving it to the rich people of a poor country." And there can't be a better example of that than what we did with Egypt. We took money from you, made people poor, it contributed to our debt, billions and billions of dollars, and all we get is chaos from it and instability. There's nothing wrong with what the founders talked about. They talked about having friendships and trade and getting along with people and staying out of entangling alliances and the internal affairs of foreign nations when it's none of our business.
Now we've been doing it for a long time and you get periods of relative stability. There was relative stability when we were propping up the Shah, but it ended up with bad results, we ended up with the Ayatollah and now we have a problem on our hands. But all the Middle East is unstable because of this, now it's Tunisia, next it's Egypt and it's going to keep going because all the problems are there because the people don't like us propping up their dictators no more than we would like it if a foreign country came in here and propped up a dictator in our country. But the real danger is that this will most likely spread and when it gets to Saudi Arabia and there's disruption there, then you are going to see some real problems and it will be a partial consequence of our flawed foreign policy. Temporary stability does not guarantee stability that we need around the world. And besides, we just flat out don't have the money, and we shouldn't be doing it.
Just remember, the Soviet system did not collapse because we had to fight them, they collapsed for economic reasons. Guess where their final plunge was on their empire -- Afghanistan. So it makes no sense for us to think that we can keep troops in 135 countries, 900 bases and think we can do it forever. So no matter how badly you want us to do that, it's time to reassess that foreign policy. It's time for us to bring troops home. We've had troops in Japan since World War 2 and in Germany, why are we paying for their defense?
There's been a lot of talk about the budget deficit and that's something that I was concerned about just a few years back, like 1976, and that's why I haven't voted for any appropriation bills during that period of time either. But people are starting to recognize it's bad, we have to do something about it, we have to have a balanced budget amendment and all these things. But, unfortunately even in spite of the improvement in the Congress right now, we don't have the votes, which is tragic. It's going to continue, and we're going to continue to bail out, we're going to continue to spend the money, nobody wants to cut. I am sure that half the people in this room won't cut one penny on the military, and the military is not equated to defense. Defense spending is one thing, military spending is what Eisenhower called the "military-industrial complex" and we have to go after that.
But let's say government, as you all, I am sure would agree, is out of control, and it's very hard for us to get a handle on it. So let's say we even theoretically, and a miracle happens and we balance the budget where we are today, it would be still a disaster because we're spending too much money. But it wouldn't change a whole lot. When a crisis comes, guess what happens? Guess who does the bailing out? The Federal Reserve used $4 trillion to pass out without congressional approval and most people say "Oh, well that's the Federal Reserve's job to do that." No, it is our job to check up and find what the Federal Reserve has done, audit them, and find out who their buddies are that they're taking care of.
The Federal Reserve creates money out of thin air, they can loan to banks, central banks of the world, to other governments and international financial institutions and we're not even allowed to know. They resent the fact that when I ask these questions, that they don't have to give us information. That's why the bill to audit the Fed is the first step to ending the Federal Reserve. But the Federal Reserve will end itself because they will destroy the dollar. Since the Fed came into existence since 1913, they've eliminated 98% of the value of the 1913 dollar, and it's continuing erosion, they pumped at first when the crisis hit $1.2 trillion and another $600 billion and believe me, there is an economic law that says you just can't continue to do this. So Congress has responsibility, they should cut back, but Congress has a responsibility to protect the value of the currency and that means that we have the moral and the legal authority to put checks on the Federal Reserve system.
There's been a lot of talk about bipartisanship after election, we need bipartisanship, and in some ways that might be true, but I'll tell you what I think about it. I think and I believe that we have had way too much bipartisanship for about 60 years. We have bipartisanship on medical care. You say, "Yeah, the current administration is giving us bad medical care." But what is done on the other administration? We've been involved for a long time. It's the bipartisanship of the welfare system, the warfare system, the monetary system, the challenge to our civil liberties, it all goes through with support from both parties. So there's way too much bipartisanship. This should be a challenge of the issue of philosophy -- good philosophy versus bad philosophy.
And when you can agree on something you should make coalitions with whomever will agree with you and come together. But I'd like to see some bipartisanship though. What I would like to see is take those big government conservatives who love to spend money and never cut their efforts and their spending and get the big government liberals where they want to spend and never want to cut and let them get together and say "It's time, this deficit isn't good, let's have a little bit of bipartisanship and cut both."
There's been talk lately about American exceptionalism. Man we like to talk about that, I think we certainly live in an exceptional country, we have been blessed, it's been the greatest country, most freedom, most prosperity. My concern is I'm afraid we're losing it! I'm afraid we've given up on our devotion to liberty, that's where our problem is. But where I think we go astray on this exceptionalism is there are some people and sometimes they're referred as neoconservatives and they're sort of neo-Jacobins where they believe that we have this moral responsibility to use force to go around the world and say, "You will do it our way or else." Well force doesn't work, it never works.
The best way to get people to act more like us if we're doing a good job, is for us to have a sound economy, a sound dollar, treat people decently, have a foreign policy that makes common sense, treat people like we want to be treated, and then maybe they would want to emulate us and say, "Freedom does work and we ought to try it." But we can't force it on other people.
There's one general rule about what we should expect from government. The First Amendment is a great amendment, freedom of expression is protected. The government shall write no laws in reference to our freedom of expression. It doesn't say that we're to have an expression of only the noncontroversial ideas -- it's freedom of expression! Now, most people are pretty good on the First Amendment, but where they slip up is; they say "The government should write no laws about the freedom of activity," so the liberals want to talk about how to regulate your economic activity, how you spend your money, and others want to regulate your personal lifestyle, but government should not be regulating us and we should adapt one other principle for that to work. We should all swear off the use of violence against our neighbors, our friends, against other countries.
The purpose of all political activity from my view point is to promote liberty. Liberty is the most important element, liberty comes from our creator, it doesn't come from our government. If we have a free society, we can go about our business and do our very best work toward virtuous things and work toward excellence. When government takes over the role of making us virtuous and making us excellent and redistributing the wealth, they only do it at the expense of liberty, and that's why we're in such terrible shape today, it's because we've allowed the government to be so much involved. If you can't steal from your neighbor, you can't send the government to your neighbor to steal for you.
Government should never be able to do anything you can't do. If you can't steal from your neighbor, you can't send the government to your neighbor to steal for you. There should be no redistribution of wealth. The exciting things that are happening today and gets me energized is coming to events like this and meeting with the young people and going to the campuses and finding out what Young Americans for Liberty have done, and believe, me the ideas and the principles of liberty are alive and well in the next generation and there's every reason in the world for us to be optimistic about what's coming.
I would like to make one suggestion before I close; just to think about because it's not a perfect solution, but especially the young people. What if could, if I had the authority to do, what if I could offer you and say "Look, we're not doing such a good job in government these days, we make promises and we don't know about the future. But would you consider opting out of the whole system under one condition, you pay 10% of your income, but you take care of yourself, don't ask the government for anything." Tragically you're probably going to have the opportunity because government is in the process of failing and they can't deliver on the goods, just as the Soviets couldn't deliver the goods and maintain their empire, we will have those same problems domestically and we face serious economic problems as this dollar crisis evolves.
But let me close with comments from Sam Adams, he says "Don't worry about it if we're not a majority, all we need is a minority keen on spreading the brushfires of liberty in the minds of man." That is what we need to do and believe me, the brushfires are burning, they will not be able to squelch the brushfires, they're burning and they're spreading and people are getting excited, because they're starting to separate it out, what true liberty is all about, what market liberty, personal liberty is and what it means in foreign policy, what it means in our traditions, the American tradition, what it means because the Constitution confirms and confers with what I'm saying. There is no authority in the constitution to have a Federal Reserve system, no authority for the welfare state and no authority for the police state, it's not there. Defend liberty!
So we should all assume personal responsibility for promoting the ideals of liberty, and one thing that Samuel Adams always advised when they were in the dire consequences of the problems of the revolution, he said "We cannot present long faces to the people " --- at [...] at that time --- "because it will make them realize how tough things are." So we should not have long faces, we do not know exactly what tomorrow will bring, but I do know that the effort is worthwhile and I do know that you can have a lot of fun defending liberty, and believe me, if you understand liberty and realize it's the only humanitarian system that existed ever on mankind, I'll tell you what, if you learn about it study and know free market economics and fight for this, I can guarantee you, you will sleep better at night, you will enjoy your life and you will feel like you're doing something worthwhile. Defend liberty!
Monday
DECEPTION AT THE FED
For the past three decades, the Federal Reserve has been given a dual mandate: keeping prices stable and maximizing employment. This policy relies not only on the fatal conceit of believing in the wisdom of supposed experts, but also on numerical chicanery.
Rather than understanding inflation in the classical sense as a monetary phenomenon-- an increase in the money supply- it has been redefined as an increase in the Consumer Price Index (CPI). The CPI is calculated based on a weighted basket of goods which is constantly fluctuating, allowing for manipulation of the index to keep inflation expectations low. Employment figures are much the same, relying on survey data, seasonal adjustments, and birth/death models, while the major focus remains on the unemployment rate. Of course, the unemployment rate can fall as discouraged workers drop out of the labor market altogether, leading to the phenomenon of a falling unemployment rate with no job growth.
In terms of keeping stable prices, the Fed has failed miserably. According to the government's own CPI calculators, it takes $2.65 today to purchase what cost one dollar in 1980. And since its creation in 1913, the Federal Reserve has presided over a 98% decline in the dollar's purchasing power. The average American family sees the price of milk, eggs, and meat increasing, while packaged household goods decrease in size rather than price.
Loose fiscal policy has failed to create jobs also. Consider that we had a $700 billion TARP program, nearly $1 trillion in stimulus spending, a government takeover of General Motors, and hundreds of billions of dollars of guarantees to Fannie Mae, Freddie Mac, HUD, FDIC, etc. On top of those programs the Federal Reserve has provided over $4 trillion worth of assistance over the past few years through its credit facilities, purchases of mortgage-backed securities, and now its second round of quantitative easing. Yet even after all these trillions of dollars of spending and bailouts, total nonfarm payroll employment is still seven million jobs lower than it was before this crisis began.
In this same period of time, the total U.S. population has increased by nine million people. We would expect that roughly four million of these people should have been employed, so we are really dealing with eleven million fewer employed people than would otherwise be expected.
It should not be surprising that monetary policy is ineffective at creating actual jobs. It is the effects of monetary policy itself that cause the boom and bust of the business cycle that leads to swings in the unemployment rate. By lowering interest rates through its loose monetary policy, the Fed spurs investment in long-term projects that would not be profitable at market-determined interest rates. Everything seems to go well for awhile until businesses realize that they cannot sell their newly-built houses, their inventories of iron ore, or their new cars. Until these resources are redirected, often with great economic pain for all involved, true economic recovery cannot begin.
Over $4 trillion in bailout facilities and outright debt monetization, combined with interest rates near zero for over two years, have not and will not contribute to increased employment. What is needed is liquidation of debt and malinvested resources. Pumping money into the same sectors that have just crashed merely prolongs the crisis. Until we learn the lesson that jobs are produced through real savings and investment and not through the creation of new money, we are doomed to repeat this boom and bust cycle.
Rather than understanding inflation in the classical sense as a monetary phenomenon-- an increase in the money supply- it has been redefined as an increase in the Consumer Price Index (CPI). The CPI is calculated based on a weighted basket of goods which is constantly fluctuating, allowing for manipulation of the index to keep inflation expectations low. Employment figures are much the same, relying on survey data, seasonal adjustments, and birth/death models, while the major focus remains on the unemployment rate. Of course, the unemployment rate can fall as discouraged workers drop out of the labor market altogether, leading to the phenomenon of a falling unemployment rate with no job growth.
In terms of keeping stable prices, the Fed has failed miserably. According to the government's own CPI calculators, it takes $2.65 today to purchase what cost one dollar in 1980. And since its creation in 1913, the Federal Reserve has presided over a 98% decline in the dollar's purchasing power. The average American family sees the price of milk, eggs, and meat increasing, while packaged household goods decrease in size rather than price.
Loose fiscal policy has failed to create jobs also. Consider that we had a $700 billion TARP program, nearly $1 trillion in stimulus spending, a government takeover of General Motors, and hundreds of billions of dollars of guarantees to Fannie Mae, Freddie Mac, HUD, FDIC, etc. On top of those programs the Federal Reserve has provided over $4 trillion worth of assistance over the past few years through its credit facilities, purchases of mortgage-backed securities, and now its second round of quantitative easing. Yet even after all these trillions of dollars of spending and bailouts, total nonfarm payroll employment is still seven million jobs lower than it was before this crisis began.
In this same period of time, the total U.S. population has increased by nine million people. We would expect that roughly four million of these people should have been employed, so we are really dealing with eleven million fewer employed people than would otherwise be expected.
It should not be surprising that monetary policy is ineffective at creating actual jobs. It is the effects of monetary policy itself that cause the boom and bust of the business cycle that leads to swings in the unemployment rate. By lowering interest rates through its loose monetary policy, the Fed spurs investment in long-term projects that would not be profitable at market-determined interest rates. Everything seems to go well for awhile until businesses realize that they cannot sell their newly-built houses, their inventories of iron ore, or their new cars. Until these resources are redirected, often with great economic pain for all involved, true economic recovery cannot begin.
Over $4 trillion in bailout facilities and outright debt monetization, combined with interest rates near zero for over two years, have not and will not contribute to increased employment. What is needed is liquidation of debt and malinvested resources. Pumping money into the same sectors that have just crashed merely prolongs the crisis. Until we learn the lesson that jobs are produced through real savings and investment and not through the creation of new money, we are doomed to repeat this boom and bust cycle.
OUR 30 YEAR MISTAKE
The events in Egypt of late have captured the attention of the world, as many thousands of Egyptians take to the streets both in opposition to and in favor of the current regime. We watch from a distance hoping that events do not spiral further into violence, which will destroy lives and threaten the livelihoods of average Egyptians caught up in the political turmoil.
I hope that Egyptians are able to work toward a more free and just society. Unfortunately, much of the blame for the unrest in Egypt and the resulting instability in the region rests with US foreign policy over the past several decades. The US government has sent more than $60 billion to the Egyptian regime since the Camp David Accords in 1978 to purchase stability, including more security for the state of Israel. We see now the folly of our interventionist foreign policy: not only has that stability fallen to pieces with the current unrest, but the years of propping up the corrupt regime in Egypt has led the people to increase their resentment of both America and Israel! We are both worse off for decades of intervention into Egypt’s internal affairs. I wish I could say that we have learned our lesson and will no longer attempt to purchase – or rent – friends in the Middle East, but I am afraid that is being too optimistic. Already we see evidence that while the US historically propped up the Egyptian regime, we also provided assistance to groups opposed to the regime.
So we have lost the credibility to claim today that we support the self-determination of the Egyptian people. Our double dealing has not endeared us to Egyptians who now seek to reclaim their independence and national dignity.
“Diplomacy” via foreign aid transfer payments only makes us less safe at home and less trusted overseas. But the overriding reality is that we simply cannot afford to continue a policy of buying friends. We face an ongoing and potentially deepening recession at home-- so how can we justify to the unemployed and underemployed in the United States the incredible cost of maintaining a global empire? Moral arguments aside, we must stop sending hundreds of billions of dollars to foreign governments when our own economy is in shambles.
American media and talking heads repeatedly pose the same loaded questions: Should the administration encourage the Egyptian president to remain or to resign? Should the US ensure Mohamed ElBaradei or current vice president Omar Suleiman succeeds current president Mubarak? The best answer to these questions is that we should just do nothing, as Eisenhower did in 1956. We should leave Egypt for Egyptians to figure out. Some may claim that this is isolationism. Nothing could be further from the truth. We should enthusiastically engage in trade and allow travel between countries, but we should stay out of their internal affairs. We are in fact more isolated from Egypt now than ever, because the regime we propped up appears to be falling. We have isolated ourselves from the Egyptian people by propping up their government, as we isolate ourselves from Tunisians, Israelis, and other recipients of our foreign aid. Their resentment of our interventionist policies makes us less safe, because we lose our authority to conduct meaningful diplomacy when unpopular regimes fall overseas. We also radicalize those who resented our support for past regimes.
Let us hope for a more prosperous and peaceful era for the Egyptians, and let us learn the lessons of our thirty year Egyptian mistake.
I hope that Egyptians are able to work toward a more free and just society. Unfortunately, much of the blame for the unrest in Egypt and the resulting instability in the region rests with US foreign policy over the past several decades. The US government has sent more than $60 billion to the Egyptian regime since the Camp David Accords in 1978 to purchase stability, including more security for the state of Israel. We see now the folly of our interventionist foreign policy: not only has that stability fallen to pieces with the current unrest, but the years of propping up the corrupt regime in Egypt has led the people to increase their resentment of both America and Israel! We are both worse off for decades of intervention into Egypt’s internal affairs. I wish I could say that we have learned our lesson and will no longer attempt to purchase – or rent – friends in the Middle East, but I am afraid that is being too optimistic. Already we see evidence that while the US historically propped up the Egyptian regime, we also provided assistance to groups opposed to the regime.
So we have lost the credibility to claim today that we support the self-determination of the Egyptian people. Our double dealing has not endeared us to Egyptians who now seek to reclaim their independence and national dignity.
“Diplomacy” via foreign aid transfer payments only makes us less safe at home and less trusted overseas. But the overriding reality is that we simply cannot afford to continue a policy of buying friends. We face an ongoing and potentially deepening recession at home-- so how can we justify to the unemployed and underemployed in the United States the incredible cost of maintaining a global empire? Moral arguments aside, we must stop sending hundreds of billions of dollars to foreign governments when our own economy is in shambles.
American media and talking heads repeatedly pose the same loaded questions: Should the administration encourage the Egyptian president to remain or to resign? Should the US ensure Mohamed ElBaradei or current vice president Omar Suleiman succeeds current president Mubarak? The best answer to these questions is that we should just do nothing, as Eisenhower did in 1956. We should leave Egypt for Egyptians to figure out. Some may claim that this is isolationism. Nothing could be further from the truth. We should enthusiastically engage in trade and allow travel between countries, but we should stay out of their internal affairs. We are in fact more isolated from Egypt now than ever, because the regime we propped up appears to be falling. We have isolated ourselves from the Egyptian people by propping up their government, as we isolate ourselves from Tunisians, Israelis, and other recipients of our foreign aid. Their resentment of our interventionist policies makes us less safe, because we lose our authority to conduct meaningful diplomacy when unpopular regimes fall overseas. We also radicalize those who resented our support for past regimes.
Let us hope for a more prosperous and peaceful era for the Egyptians, and let us learn the lessons of our thirty year Egyptian mistake.
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