Tuesday, November 30, 2010
Monday, November 29, 2010
Update: Also, many theorists note that some sort of legal system is an additional distinguishing feature between the State and a band of thugs. The modern state governs through an institutional system made up of rules ('laws'), as opposed to informal decrees and random acts of violence.
"How on earth can a politician telling the truth be a bad thing?"
This got me thinking: should we assess this statement from the standpoint of institutional design or from the standpoint of pragmatic administration? In other words, should we assess the truthfulness of politicians with an eye towards systematic consequences or on a case-by-case basis? I can easily think of hypothetical situations where it is a "good" thing for politicians to fudge the truth (e.g., probabilistic chance that awful event X happens, and the only possibility of preventing event X is if the general population remains calm and orderly).
Let me start by stating that I am an anarchist. This means different things to different people, but to me it means I am anti-State, anti-War, and pro-Liberty. Being pro-Liberty means I believe people have the right to do as they please so long as they do not harm another, i.e. aggress against another. Incumbent in that is the fact that people have the right to retain the fruits of their labor, without it being stolen from them, and can use such “fruit” as they see fit (including trade it). The State is inherently evil as its entire existence is predicated upon theft and coercion. The State exists because it illegitimately claims authority and jurisdiction over individuals on the sole basis of their residence within an imaginary set of lines. The State sustains itself through taxation, which is nothing more than the theft of privately created wealth. The State erects artificial barriers to entry in market places and, contrary to popular belief, creates far more poverty than would otherwise exist. This really deserves its own post, indeed its own multi-volume anthology.
Back to Hume’s comment. “[S]hould we assess this statement from the standpoint of institutional design or from the standpoint of pragmatic administration.” As so often happens, I feel I cannot really respond to this statement. The underlying premise, to me, is flawed. The “institutional design” is a function of the coercive acts of the State. The institutional design of democracy is premised upon individuals electing representatives to reflect/protect/advance their specific interests against the interests of other individuals forced into a “society” with them.
I believe we can only assess the “rightness” or “wrongness” of any statement or action from the standpoint of “does it harm others? does it infringe upon the natural rights of others?” When a politician lies to the general public, it has an effect on markets. By markets I do not only mean equity, credit, commodity, etc markets that are talked about on CNBC and in the Wall Street Journal. By markets, I literally mean every single transaction that takes place between consenting individuals and entities. Such lies have the effect of distorting available information, which, in turn, has the effect of skewing the transaction away from what would otherwise be the natural reactions of markets. This necessarily harms people – decisions are made and actions taken based on information that is flawed due to the calculated lies told by a politician attempting to advance his own interests (which often happen to coincide with the interests of those occupying the power circles created in the first instance by the State).
This creates harm. Some one or some many ones will end up in a losing position because the markets generally were influenced by a conscious lie. At least some portion of those losers would have acted differently but for the flawed information.
I know this is likely dissatisfying, as it does not really address Hume’s comment. I, however, truly believe that it is foolish to attempt to analyze the pragmatism or practicality of political actions taken by State actors. The entire institution is criminal and ought to be destroyed.
Thursday, November 25, 2010
Wednesday, November 24, 2010
Last night while driving home from work, observing the lovely scenery from a standstill position on the BQE, I was listening to Bloomberg Radio, specifically a replay of “Bloomberg on the Economy,” which was originally broadcasted earlier in the day. The host, Sarah Eisen, was discussing the debacle that is the state of EU finance and the Euro itself with a guest, who was the top economist from a major investment firm.
Eisen began by referencing a statement German Chancellor Angela Merkel made earlier in the day, which was something to the effect of “The Euro is in an exceptionally serious situation,” due to the crushing debt:GDP ratios of EU countries and the bond markets realization that, hey!, this could be more problematic than we previously thought. Eisen then asked the guest, “What was she [Merkel] thinking in saying that?!!,” implying that the bond and currency markets reactions would be harmful. Several thoughts immediately popped into my head, only one of which is discussed below:
How on earth can a politician telling the truth be a bad thing? One need not be a long time economic analyst or expert on EU financing to understand the entirely unsustainable debt load the member States are facing. Yes, the specifics of the problems facing each country are somewhat different, i.e. Ireland’s is the result of the government’s guaranteeing of horrific bank loans, whereas Greece’s stem more from impossible entitlement programs and public sector contracts. The main thrust, however, is the same for all – bondholders realize that these States’ debt repayment abilities are more or less non-existent.
The only thing I could infer from Eisen’s comment was that she somehow believes that if politicians, central bankers, etc. simply lie about the true state in which the EU and its member States find themselves, everything will end up bright eyes and blue skies. The ever-so en vogue “kick the can”/“extend and pretend”/“O.D. on hopium” meme that governments, banks and most of the mainstream media would have the (mostly) economically illiterate populous swallow as a panacea is nothing more than snake oil.
Eisen's inferred position is, of course, pure folly. The idea that one can simply stick his head in the sand and avoid problems by ignoring them is so ridiculous that the average 6 year old has little trouble understanding the concept. Merkel’s comments are exactly the type that should be made. The most important function of markets is their ability to convey information, through pricing, in the fastest and most efficient manner known (and, indeed, possible). By lying, extending and pretending, and kicking the can, prices do not drop to where they must. This leads to poor decisions based on incorrect information. In a truly freed society, this resolves itself easily and of its own accord, as issues of sovereign debt would not exist. Sovereign debt is far different than any other type of debt, since other borrowers do not have the option of throwing millions of people in cages if they refuse to surrender money to the borrower. Additionally, other borrowers do not have the ability to counterfeit money to pay off these debts (although individual EU member States do not have this option either).
No, in a freed market, the only option for a borrower who cannot repay its debts is default and bankruptcy. In the current world in which we live, however, governments no longer default. They bailout banks and bondholders, they bailout member States, they steal through taxation, they counterfeit money by printing at will, with nothing of value behind it. These “solutions” are always at the tips of their fingers and, therefore, they always believe that if they can just have a little bit more time, the situation will resolve itself. “If we could just get people spending again!” … one is left with no savers, ergo no investors, ergo no way to create new businesses or expand current businesses, ergo no way to produce jobs, ergo no way to truly recover. Economies do not grow on hopes and dreams, they grow on investments made with the aid of free-flowing, unencumbered information.
But it’s OK – keep up the lies distorting the true economic reality. Keep perpetuating the biggest Ponzi scheme ever devised.