A Hungarian man sweeps paper money out of the gutter

Answers To: “The problem with the Fed is that it’s private”

I hear this argument in most critiques of the Federal Reserve, so it definitely needs to be addressed.

Talking to an anti-Fed person, you may have heard something like “The Fed is terrible, it controls all our money.  And did you know it’s private?!”

The implied or stated proposal being that government should take over the money-printing.  But it’s not the fact that the Fed is partially private that’s the problem – it’s the fact that it’s partially government!  What’s bad about it is that we’re all forced by law to use their currency.  It is a legal monopoly on money, for which there is no ethical justification.

From a voluntary ethics standpoint, no one should be forced to use or not use any money, or prohibited or compelled to issue money.  But even from a utilitarian view, a government takeover of money would not be a very good safeguard against monetary inflation.  Historically, governments have debased their currencies as a means to finance their grand schemes, variations of bombs or bread.  Can you imagine what Congress would do without the admittedly weak restraint of the Fed?  They’d spend into oblivion, even more than now, and destroy the dollar in the process!

The real answer is – eliminate the Fed’s legal monopoly on money.  Let them be a private bank competing in a free market.  Of course, they probably would go out of business, but hey, that’s free market capitalism!

Contrails on Jet

Debunking “conspiracy theory”

Why the quotes around “conspiracy theory”?  Because I’ll be debunking the term “conspiracy theory”, not the ideas referred to as conspiracy theories.  The purpose of the term is to attack any non-conformist idea about how the world works, without actually engaging the idea itself.  It’s a way of shutting off the brain and letting the mainstream media and government textbooks do your thinking for you.

This is not to say that all theories of the world, or allegations of conspiracy, are correct, or tend to be correct.  Many are incorrect or simply unsubstantiated.  This article is also not a defense of conspiratorial thinking, or belief that historical events can only be explained by conspiracies.  The point is not about any particular idea, but how we evaluate all ideas:  Giving some undue credence, while ignoring others because they don’t fit the standard narrative.

Frequently, establishment shills in the media and academia “debunk” such crazy “conspiracy theories”, or even conspiracy theories as such, as if there is no intellectual escape from their approved opinions.  Let’s debunk the debunkers!

“Conspiracy theory” as rhetorical device

global government CFRBefore debunking specific arguments, let’s look at “conspiracy theory” as a rhetorical device.  It is not selected haphazardly.  The word “theory” connotes speculation, uncertainty, whimsy, in everyday usage.  Just as some creationists mock evolutionary theory because it is “just a theory”, debunkers attack the validity of an idea before even engaging it.  Doesn’t matter if your idea is based on documentation and facts cited by reputable sources – it’s just a “theory”.

Simply calling an idea speculative isn’t enough though.  It’s too arbitrary.  We need a specific, descriptive modifier, to give the appearance of solidity to the attack.  Ah!  “Conspiracy” – Sounds so shadowy and creepy.  Grammatically, it is a modifier on “theory”, creating the impression that the theory itself is conspiratorial and dark, as are the people who espouse such crazy ideas.  Thus we have “conspiracy theory” – the perfect, catch-all answer to any non-conformist idea about the world!

In an ironic twist, it turns out the CIA actually coined and promoted the term “conspiracy theory” for precisely this purpose.

Double standards

911 WTC world trade centerNotice how mainstream conspiracy theories are never referred to as “conspiracy theories”?  I mean, bin Laden and his merry band of hijackers supposedly had a secret conspiracy to take down the World Trade Center towers with planes.  If anyone but the mainstream media proposed this story, it would be labeled a crazy conspiracy theory!  But no, it’s a perfectly valid view of history, despite inconsistencies and discrepancies.  On the other hand, the idea that there were perhaps other actors involved in the operation, perhaps even in the US government, well that’s just a crazy “conspiracy theory”!  So, it’s not a descriptive term at all.  It’s a rhetorical device to invalidate a non-conformist idea before it’s even considered.

No WMDs in IraqAlso, notice how the epistemic standards applied to non-conforming ideas are much, much higher than those applied to conforming ideas.  The burden of proof is through the roof!  No matter how much evidence you present, and how consistent your theory is with human behavior, the debunkers will demand absolutely undeniable physical proof of every part of the claim.  Of course, mainstream narratives face no such requirements.  No matter how ridiculous the claims get, such as the Syrian government supposedly attacking its own civilians with chemical weapons, no proof is demanded whatsoever.  It’s all about maintaining the party line, conforming to the establishment narrative, and not at all about finding the truth.

Answers To: “Conspiracies can’t last because someone will talk.”

Moon landing and flagThe biggest argument the debunkers love is that conspiracies are inherently unsustainable because eventually, one of the conspirators will talk and blow the whole thing out of the water.  Nevermind the piles of conspiracies throughout history that falsify this argument, let’s examine the logic.

This argument usually gets presented with something like the faked moon landing theory, that, well, there were all these people involved, all these engineers, and nobody spoke up?  You’d think among thousands of people involved in a conspiracy, at least a few would blow the cover.

Well hang on a second.  Isn’t that exactly what the CIA is?  And every other intelligence agency.  How do they manage to have an organization of thousands of people and keep things secret?  Yes, NASA is not the CIA, but it’s not the Boy Scouts either.  NASA had national security objectives and keeping such secrets, even among many people, is precedented.

If people’s interests are aligned in an organization, it’s indeed possible to keep a conspiracy secret.  This is done by aligning financial interests, making sure everyone gets a piece of the pie, or by threat of punishment.  If you talk, we’ll come after you and your family.  These methods are well known and effective.

CIA Special Operations - Covert ActionsThe “someone will talk” argument also ignores compartmentalization.  The CIA uses it all the time.  The idea is that not everyone involved in executing a secret plan has to know the exact nature of the plan.  Most of the staff for a fake moon landing might not be aware it’s fake, just fed simulated information.  Only a few people need to be aware of the reality.  Again, I’m not arguing for the faked moon landing theory, just pointing out why this argument against it is weak.

Lastly, simply releasing information to the public doesn’t mean anyone will pay attention.  The apathetic public yawns when past conspiracies are regularly outed and finally admitted to.   The debunkers conveniently ignore those.  And if any conspiracists did come forward and admitted the moon landing was faked – the debunkers would be the first to dismiss them as wackjobs!  So, there’s no winning with these people.

Answers To: “There have never been conspiracies.”

Masonic pyramid on dollar billThe implication of debunking “conspiracy theories” as such is that there have never actually been any conspiracies in history.  Of course, this is obviously false.  Past conspiracies are well-documented, but I’ll just mention a couple that are now accepted as historical fact.

The meeting in 1913 on Jekyll Island that formed the Federal Reserve was a quintessential conspiracy, that now is simply accepted historical fact, albeit ignored.

The Gulf of Tonkin incident, a purported attack on US ships by North Vietnam that provided the basis for the Vietnam War, ended up being … nothing but radar ghosts.  The war was planned long before and this was merely a contrived pretext.  Sound familiar?

There are also many later-declassified plans that did not go through initially, but which provide a blueprint for future action.  Operation Northwoods was a US military plan to cause false flag attacks and blame them on Cuba, to provide justification for overthrowing the Cuban government.   Such operations demonstrate the mentality and means of those in power.  Does anyone really believe such plans were scuttled and forgotten about after the 1960s?

Answers To: “We can only know about the world by the particular facts we can directly observe.”

Ignorance is sticking your head in the sandThis argument is an inversion of the scientific method.  Science derives universals about the world through experimentation and then deductively applies them to particulars.  Saying that we must prove all particulars is ludicrous:  it implies we do have to be in the forest to know whether the tree that fell really did make a sound.  It denies the reality of our limitations.

The problem is that we simply can’t know every particular about the world, or even most of it. In social science, we can test theories about how the human world works, then deduce likely motives for particular actions.  This applies to both current events and history.

Pharaoh Ramses of Egypt - HieroglyphsThe old aphorism is that history is written by the victors.  Unlike geology or biology, history doesn’t rely on physical evidence, but man-made accounts.  These are inevitably colored by prejudice and agendas, distorted, hidden, destroyed, censored.  Most of human history is simply unavailable to us.  We are forced into making judgments according to a present-day worldview, which is why it’s incredibly important to constantly critique and revise our notions about history.

What is true of history is true of the present.  Direct experience is very limited for most people.  We rely on media and others for our knowledge about the world.  At each step in this knowledge-gathering process lies the potential for distortion.  Media can be bought, manipulated, censored.  Individuals can be threatened, rewarded, or they self-censor based on their perceived risk.  Documents, meetings and finances can be hidden.

iceberg is hiddenAll is not always what it seems.  We have to read between the lines to understand the motivations of players, which are critical for filling in the blanks about the world.  If we restrict ourselves to proving particulars before accepting any theory of the world, then we are hopelessly at the mercy of whoever has power and influence in the present.

The danger of this approach of course, is the rabbit hole of conspiratorial thinking, that everything that happens in the world is planned that way.  But vigilance and debate are the antidote, not dismissing ideas out of hand because they do not conform to the popular narrative.  Just as natural science is not harmed, but actually powered, by constant hypothesis and revision, let the field of politics and history also be a marketplace of ideas.

Dutch tulip bulb mania

Answers To: “Free markets don’t work because people are irrational”

It’s government planning that depends on rational actors.  Irrational actors will result in a flawed plan, which is then imposed on the entire society.  One irrational bureaucrat at the top could spell disaster for everyone else.

A free market implies nothing about the rationality of its actors.  Those who end up making the best investment decisions get a return on capital, while those who make bad decisions lose.  Over time, this produces a natural selection pressure in the economy, towards more efficient habits, procedures, and technologies; but, this tendency has nothing to do with the rationality of individual actors in the system.  They could be rational or irrational, taking planned or random actions.

This process is analogous to natural selection in biology.  As long as expressions of fitness can be retained over time, selection pressures will produce life forms optimized to their environment.  Those who claim a functioning economy requires an all-knowing, “rational” central planning committee to make order out of the irrational chaos of society, are proposing the necessity of economic “intelligent design”.

That assumes there is and should be an objective and particular purpose for the economy.  But, there is no such thing, because people’s preferences and goals are subjective.  There is no such thing as “market failure”.  It is impossible to objectively evaluate economic outcomes without an a priori ethical framework, but this is what economists pretend to do.  The result is nonsensical arguments like this one.

If we boil it down, this is not an economic argument at all, but an ethical one.  The person making the title argument is saying “People engaged in free, voluntary trade are doing things I don’t like.  Therefore they are irrational and this represents a market failure.”  My response is “live and let live”!

Hear no evil, see no evil, speak no evil

Answers To: “Taxes/regulations aren’t backed by violence”

So I’m going to start this “Answers To” series where I respond to some of the more common and inane arguments I hear in support of government.  This isn’t so much to uncover new theoretical arguments, because most of this stuff has been dealt with by libertarian thinkers.  It’s more about rhetoric – how an argument is presented and what an effective response might be.  I encourage you, dear reader, to submit arguments you’ve heard (and answers!) to apollo at apolloslater dot com.

A common one I’ve heard is one probably encountered by most libertarians.  You’ll be arguing with your friend about some tax or regulation and you’ll say something like, I don’t think people should be “forced at gunpoint” or that “violence” should be used to accomplish something.  At which point your friend gives you a blank stare and thinks you’re bananas.

After all, you don’t see mass executions of people who aren’t paying taxes!  Maybe if someone screws up, they pay a fine and that’s the end of it.  So there’s a lack of perspective here – not seeing the end of a chain of events that resisting taxes would bring about (I’m charged a fine; if I don’t pay, I’m thrown in jail; if I resist, I’ll be beaten or shot).  And not seeing the threat of violence that underpins government mandates, precisely because the threat causes most people to comply, making the execution of the threat a rare, unobserved event.

Explaining this chain of events and the effect of the underlying threat may help your friend understand your position.  You can also say, I’ll agree to your new tax or regulation, as long as the government cannot use physical force to enforce it.  Put the onus on him to describe how his program would work without the threat of physical violence.  If it does, then he is describing a voluntary program.  If it requires a threat, then you’ve proven your point.

Bitcoin broken

Bitcoin is a ponzi scheme

All “cryptocurrencies” based on artificial limits are inherently pump-and-dump schemes.  If they were true free market currencies, the money supply would grow with demand. Instead, they are artificially restricted.  Why?  To create the illusion of limited supply and therefore expectation of future scarcity and speculative profit.

Bitcoin price chart 2017They are fiat currencies, based on nothing but this speculation.  The Bitcoin price chart shows this.  Bitcoin fanboys point to the skyrocketing price as a badge of honor, but all it shows is that it is a speculation, not a store of value.  It has no price stability, and cannot be considered a “currency”.

In the short term, the price will keep going up for various reasons.  Mining is getting more expensive and less profitable, driving out miners and restricting supply.  Use as a pseudo-anonymous money transfer scheme is increasing on the dark web.  A method of circumventing Chinese capital controls.  An investment vehicle for Chinese with not enough local investment options.

But eventually, people will realize NOTHING holds up the value of Bitcoin.  No petrodollar, no USG taxation.  And it will collapse, as will the rest of the currencies that will inevitably fork off this one.  This is even ignoring the major security and regulatory issues that plague Bitcoin.

Currency is a form of social credit.  It’s an implied debt, that someone will pay off with goods & services in the future.  This should be the basis of any cryptocurrency, not arbitrary and artificial limits on supply, and fancy math for its issuance.

Costs vs benefits of patents

Is intellectual property really property? (Part 3)

Continuing on part 1 and part 2 in our series on intellectual property, today we look at why the social value of patents is greatly overestimated.

Patents not necessary for innovation

Most patents are not litigated.  That would be insanely expensive.  What ends up is a policy of mutually-assured destruction, where big companies build up patent portfolios as a defensive measure.  But this could be accomplished with a voluntarist patent system, where you lose protection of your patents, if you violate anyone else’s.

Trade secretsMost intellectual property is not patented.  It is squirrelled away as trade secrets.  It lies in the particular operations and tradecraft of millions of businesses.  That means most of the innovative power of the economy is not dependent on the government-run patent system.  Then we have to question whether the patent system itself is necessary.

Huge costs of patents

The supposed benefits of patents to innovators are the justification for the system.  But the costs to innovators and startup businesses are overlooked.

patent_troll_chartPatent trolls build up massive patent portfolios and litigate against any startup in a particular field, even without merit, as the cost of defending is extremely high.  This creates huge uncertainty in entrepreneurship and requires a lot of capital to start up.  It is another example of government-mandated capital concentration.

Innovators are more likely to get hammered by a lawsuit, than to benefit from a patent that takes millions to grant and to defend.  This means patents are not necessary for innovation and they actively discourage it.  This obviates the very reason patents were created in the first place.

The costs greatly outweigh the benefits of the current patent system.  And it certainly is not any better than a voluntarist system, that does not rely on violence for enforcement, but only mutal respect of participants’ intellectual property.

 

Bitcoin electronic currency

The Bitcoin mirage

This post is an edited collection of my responses to James Corbett’s interview of Ken Shishido on Bitcoin.

Bitcoin was an interesting experiment in digital currency, and there will be many more, with improvements. It is definitely not a real currency though. The recent Bitfinex hack, wiping out 36% of account balances, on top of many previous hacks, show it’s less safe than even a fiat bank account.

Ken Shishido’s recommendation to put into Bitcoin “what you can afford to lose” is a reminder that it’s a speculation, not money. Still, it’s definitely worth keeping an eye on developments with blockchain technology and new Bitcoin-like instruments that perhaps address the past issues with Bitcoin.

Bitcoin, exchanges, and security

Hacker in hoodieSome make the distinction that hacks have targeted exchanges or warehouses, not Bitcoin itself.  While the distinction between Bitcoin itself and exchanges or warehousers is important, the average person trying it out won’t necessarily understand this or its security implications. To them, the end-to-end process constitutes the solution, and most likely that will include an exchange.

You can get Bitcoin either by mining or by buying them on an exchange. Since mining is now incredibly expensive and technically challenging, the vast majority will buy on exchanges, which is a security risk, even if you don’t warehouse your bitcoin. In addition, most retail merchants accepting Bitcoin immediately liquidate receipts into dollars, making much of the market value of Bitcoin dependent on exchanges.

Even if you avoid exchanges altogether, you are still affected by these hacks. Since Bitcoin’s value depends so heavily on exchanges, a loss of confidence leads to a massive loss of value in the currency itself. This indeed happened after the Bitfinex hack.

There are also issues with the security of storing Bitcoin yourself, of transmitting them, the questionable privacy of a public transaction ledger (blockchain), and many other issues that the average person frankly will not understand or have the time to study. For the average person, the most secure currency is paper dollars, or gold/silver as a small inflation hedge.

There’s a lot of potential in cryptocurrency, both on the central bank side and the peer to peer side. I just don’t think Bitcoin is a particularly good solution, except maybe in certain use cases like international money transfers, that are plagued by high fees. But it’s a lot less than its hype.

Inflation Hedge vs Paper Money

One hundred billion mark note, Weimar Republic

One hundred billion mark note, Weimar Republic

In comparing Bitcoin to fiat or paper currency, Bitcoin advocates point to the inflationary history of paper money and its control by central banks. However, most modern currencies do not hyperinflate. Zimbabwe, Venezuela, the Weimar Republic, etc. are outliers due to unique political circumstances. Of course, that may change and eventually the US dollar will hyperinflate and collapse. But the key word is “eventually” – it may not happen for a very long time (or it may happen next year).

There are three things working against a dollar collapse, no matter how much they try to destroy it: 1. the oil market is priced in dollars, 2. it is required to pay US gov’t, fed./state/local taxes, 3. it is legal tender for the private US economy. So we’re talking about a backstop of many trillions of (current) dollars in value, something no other currency or country can match. So it’s unlikely to “collapse” anytime soon.

If we talk about collapse, Bitcoin lost 80% of its value in 2015, then recovered a bit, then recently lost 25% of its value. That’s a much bigger loss of value than is likely in the dollar, whose deprecitation is pretty stable over time. Bitcoin’s price may stabilize later on, but it’s not ready for prime time and definitely not a stable store of value.

Anyway, let’s be real. For most people these currency hedges don’t matter, because they don’t have much money to begin with. Liquidity is more important, to pay the bills, so dollars (or your local currency) are best. If you do have a lot of money, then sure, have some small hedges with precious metals, a little with Bitcoin, maybe some art, etc. They all carry their own risks. There is no such thing as a risk-free store of value.

UPDATE 08/19/2016: Bitcoin.org has warned that the code for Bitcoin itself may be hacked by government agents.  Not even the currency itself is entirely secure!

boot-stamping-face

Occupational licensing hurts the poor

This is a continuation of the series on why capital concentration is the result of government, not of the free market.

Occupational licensing is one of those nasty abuses of the citizenry that should outrage both the right and the left, yet it’s still rampant in this country.  It is a perfect example of government protecting the bigger and stronger, and stomping on the weaker.  It hurts low-income entrepreneurs the most and has no rationale that is not already fulfilled by private, voluntary rating systems such as Google and Yelp.

Local and state governments make money through licensing fees, occupational schools make money from mandatory classes, and incumbent businesses are protected from competition.  Who are the losers?  Hard-working poor people who are ready and willing to provide valuable services but are threatened with jail and fines if they do so.  Consumers also lose, by paying higher prices than they would in a free market.

Next time on this series: the financial industry.

Bitcoin broken

Bitcoin is a ponzi scheme

All “cryptocurrencies” based on artificial limits are inherently pump-and-dump schemes.  If they were true free market currencies, the money supply would grow with demand. Instead, they are artificially restricted.  Why?  To create the illusion of limited supply and therefore expectation of future scarcity and speculative profit.

Bitcoin price chart 2017They are fiat currencies, based on nothing but this speculation.  The Bitcoin price chart shows this.  Bitcoin fanboys point to the skyrocketing price as a badge of honor, but all it shows is that it is a speculation, not a store of value.  It has no price stability, and cannot be considered a “currency”.

In the short term, the price will keep going up for various reasons.  Mining is getting more expensive and less profitable, driving out miners and restricting supply.  Use as a pseudo-anonymous money transfer scheme is increasing on the dark web.  A method of circumventing Chinese capital controls.  An investment vehicle for Chinese with not enough local investment options.

But eventually, people will realize NOTHING holds up the value of Bitcoin.  No petrodollar, no USG taxation.  And it will collapse, as will the rest of the currencies that will inevitably fork off this one.  This is even ignoring the major security and regulatory issues that plague Bitcoin.

Currency is a form of social credit.  It’s an implied debt, that someone will pay off with goods & services in the future.  This should be the basis of any cryptocurrency, not arbitrary and artificial limits on supply, and fancy math for its issuance.

Bitcoin electronic currency

The Bitcoin mirage

This post is an edited collection of my responses to James Corbett’s interview of Ken Shishido on Bitcoin.

Bitcoin was an interesting experiment in digital currency, and there will be many more, with improvements. It is definitely not a real currency though. The recent Bitfinex hack, wiping out 36% of account balances, on top of many previous hacks, show it’s less safe than even a fiat bank account.

Ken Shishido’s recommendation to put into Bitcoin “what you can afford to lose” is a reminder that it’s a speculation, not money. Still, it’s definitely worth keeping an eye on developments with blockchain technology and new Bitcoin-like instruments that perhaps address the past issues with Bitcoin.

Bitcoin, exchanges, and security

Hacker in hoodieSome make the distinction that hacks have targeted exchanges or warehouses, not Bitcoin itself.  While the distinction between Bitcoin itself and exchanges or warehousers is important, the average person trying it out won’t necessarily understand this or its security implications. To them, the end-to-end process constitutes the solution, and most likely that will include an exchange.

You can get Bitcoin either by mining or by buying them on an exchange. Since mining is now incredibly expensive and technically challenging, the vast majority will buy on exchanges, which is a security risk, even if you don’t warehouse your bitcoin. In addition, most retail merchants accepting Bitcoin immediately liquidate receipts into dollars, making much of the market value of Bitcoin dependent on exchanges.

Even if you avoid exchanges altogether, you are still affected by these hacks. Since Bitcoin’s value depends so heavily on exchanges, a loss of confidence leads to a massive loss of value in the currency itself. This indeed happened after the Bitfinex hack.

There are also issues with the security of storing Bitcoin yourself, of transmitting them, the questionable privacy of a public transaction ledger (blockchain), and many other issues that the average person frankly will not understand or have the time to study. For the average person, the most secure currency is paper dollars, or gold/silver as a small inflation hedge.

There’s a lot of potential in cryptocurrency, both on the central bank side and the peer to peer side. I just don’t think Bitcoin is a particularly good solution, except maybe in certain use cases like international money transfers, that are plagued by high fees. But it’s a lot less than its hype.

Inflation Hedge vs Paper Money

One hundred billion mark note, Weimar Republic

One hundred billion mark note, Weimar Republic

In comparing Bitcoin to fiat or paper currency, Bitcoin advocates point to the inflationary history of paper money and its control by central banks. However, most modern currencies do not hyperinflate. Zimbabwe, Venezuela, the Weimar Republic, etc. are outliers due to unique political circumstances. Of course, that may change and eventually the US dollar will hyperinflate and collapse. But the key word is “eventually” – it may not happen for a very long time (or it may happen next year).

There are three things working against a dollar collapse, no matter how much they try to destroy it: 1. the oil market is priced in dollars, 2. it is required to pay US gov’t, fed./state/local taxes, 3. it is legal tender for the private US economy. So we’re talking about a backstop of many trillions of (current) dollars in value, something no other currency or country can match. So it’s unlikely to “collapse” anytime soon.

If we talk about collapse, Bitcoin lost 80% of its value in 2015, then recovered a bit, then recently lost 25% of its value. That’s a much bigger loss of value than is likely in the dollar, whose deprecitation is pretty stable over time. Bitcoin’s price may stabilize later on, but it’s not ready for prime time and definitely not a stable store of value.

Anyway, let’s be real. For most people these currency hedges don’t matter, because they don’t have much money to begin with. Liquidity is more important, to pay the bills, so dollars (or your local currency) are best. If you do have a lot of money, then sure, have some small hedges with precious metals, a little with Bitcoin, maybe some art, etc. They all carry their own risks. There is no such thing as a risk-free store of value.

UPDATE 08/19/2016: Bitcoin.org has warned that the code for Bitcoin itself may be hacked by government agents.  Not even the currency itself is entirely secure!