DB, you are definitely on the right track here.

We have not yet had a pure free market economy as Mises described in Human Action, pp. 238-239. We have moved significantly in that direction, and do enjoy many benefits of invention, innovation, and market exchanges. But the temptation for the state to interfere with the market has been simply too great, and the ability of the people to resist it too weak. As Mises wrote, "From time immemorial governments have been eager to interfere with the working of the market mechanism." (Omnipotent Government, p. 58). The fiscal-military state was not long in developing with types like Alexander Hamilton in charge at Treasury.

In the twentieth century, these interventions accelerated and worsened significantly. Inflationary credit expansion and constant warfare were the hallmarks of that century, and continue to be of this one. What awaits us at the end of this journey is too terrible to contemplate unless cooler head of Austrian bent prevail.

Revisionist history reveals that the elites mandated that the masses be taught fairy tale history, while suppressing all challengers, consigning them to decades of oblivion. And there the challengers remained in obscurity, dormant and unappreciated, while the masses remained in darkness. Until now.

This is the reason that wrong ideas about economics have persisted for so long. The elites want it this way, and they have the means to make others teach the masses in this manner. Thus, you have all these illusions and confabulations about economics that you are taught in school and hear about in the mainstream news. They are all part of the control grid.

Whatever concessions that the state has made to the market historically, they have only been such as have kept the masses pacified and producing. Otherwise, the economy has simply grown spontaneously in spite of the state, bypassing its silly regulations every which way it can, sometimes making them obsolete before the ink was dry on the legislation.

The only reason why a relatively free and prosperous market society arose in America at all was because the geography of the New World was so far removed from the clutches of the British Empire and was geographically so vast that the establishment of the system of lords and tenants, and all the other repressive machinery of the state which had prevailed in England was difficult or impossible to duplicate or maintain here. People could usually get away from oppressive circumstances and controlling busybodies by simply striking out for another colony or the frontier. They did not necessarily have to put up with abuse from the authorities or anyone else the way they did on the island (prison?) of England.

But this all took time as the population and economy grew. As small settlements bordering on Indian country where survival outside the colony was nearly impossible, the colonies, too, were actually pretty controlling and repressive in their own right at first, at least by our standards. As pioneers moved inland, they got away from colonial authority, and colonial control over them began to weaken.

It has also taken time for the elites to recover their controls over the American people as new states have formed out of the territories. The rough and ready democracy of frontier life has gradually given way to a seamless control grid, and the liberty of the "frontier" spirit has waned. We no longer have the advantage of the wilds to escape to.

Even so, we still have the advantage of a huge and very complex country which cannot be controlled by a single centralized authority. Therefore, the US cannot be ruled by such an authority without resort to tyranny, and that is where the elites are getting themselves into trouble.

There must a decentralization of the state, or we are headed for secession, civil war, or revolution.

Reply from The Daily Bell

Excellent analysis. Thanks. We would only add that at one point, pre Revolutionary War, the colonial states themselves, in varying degrees, were relatively free.

Stockman: This is the Start of Housing Bubble 2.0 Advertisement Details DescriptionFormer Reagan Budget Director David Stockman on the impact the Fed is having on the housing market. Feb 8, 2013


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We already have fallen into it. I do not see a way out.
With the fusion centers collecting all our data and with
so many laws and regulations, we will all be felons
and at their mercy.

I expect soon that you and other leaders will be in prison
or dead. How do you think you can escape it or even
survive?

Whether you believe in prophesy or not, soon
you will have to take a number to buy or sell. Your DNA
will probably be compromised by either the food you eat
or the medicine you take.

How will you survive? How will I?

"It merely denies people the best products and services available. If market competition offers something overseas that is better than a domestic offering, why shouldn't people be able to take advantage of it?"

Transportation costs are distorted by the current economic system. Most foreign exporters of goods would not be able to afford the transport cost if the various governments did not intervene in the markets. Governments subsidise and control the price of energy.

"Gary North or his almost-always"
YEP, almost.
"This mentality holds that tariffs are good"
Tariffs are great if you ignore Smoot-Hawley and most others.
"The Luddite/anti-tariff mentality"
I claim that THAT is TWO ideas /mentalities.

"feedbackers who claim robots are going steal the jobs of average working men."
I suppose that that would be me.
A very large Chinese manufacturer bought 500,000 robots. I won't drag this out now.

"provides additional leisure time - for everyone" FALLACY

Americans not in the labor force;
2006: 77,387,000
2007: 78,743,000
2008: 79,501,000
2009: 81,659,000
2010: 83,941,000
2011: 86,001,000
In January, there were supposedly 89,868,000 Americans that were at least 16 years of age that were not in the labor force."

Automation and outsourcing provides 100% leisure time for PART of the population.
Gary North's thinking is far too simplistic for me. Re: CAFR

"one applied maliciously with the idea of reducing people's independence "
Could be ? I sure don't know.
Click to view link

Keep in mind that all GOV is socialist. All socialists are in a lifelong fight against natural law and survival-of-the-fittest.
My Neo-Luddite claims are that there are just no job niches for an increasing % of people. As the industrial revolution works it's way up the ability ladder, there are fewer niches.
I have to deal with some incredibly untalented people every day. In a perfect free market, they wouldn't survive.
No, I don't have a solution.

Excellent article. However I believe a point about automation has been missed. I'm referring specifically to the comment "progress merely provides additional leisure time - for everyone. If technology does away with the necessity for workers to work, then they would not starve in a free-market world; they would merely partake of the benefits that technology bestowed."

Technology does not do away with the necessity for workers to work. Nor does it necessarily result in more leisure time. It merely imporves the efficiency of converting natural resources into marketable products. Yes, workers may have to learn how to assemble robots instead of automobiles but this is beneficial to everyone. It still takes labor to convert iron ore into the steel for robotic arms. It still takes labor to dig the iron ore out of the ground to make steel. It takes labor to manufacture the silicon wafers used in the computers that control the robots. It takes labor to program the computers to do their work, etc., etc. When the overall picture is viewed, there is only a shift of labor from manual to technological activity which increases production effeciency. This simply means that we all enjoy more commodities at a cheaper price than would otherwise be available.

Can we imagine what it would take to produce today's automabiles with the tools used to make a 1937 Chevy? Impossible. A quick calculation will show that a 1937 mid range Ford four door sedan cost 25 ounces of gold. Today's mid range Ford four door sedan cost 20 ounces. In other words a more complex and comfortable car cost less money.

This imporvement is the gift of technological imporvements in production techniques. Let's not fall for the socialist mantra that technology results in unemployment. Wage and price controls create unemployment and these are the darlings of socialists.

Reply from The Daily Bell

"In a real free-market environment, progress merely provides additional leisure time – for everyone. If technology does away with the necessity for workers to work, then they would not starve in a free-market world; they would merely partake of the benefits that technology bestowed."

Well, it was inartfully phrased. But it does seem evident and obvious that automation can (or should) provide leisure time in the modern society for the individual who partakes of it. Also, we include wealth in our definition. If a free-market generates wealth, then the individual has the choice of how to use that wealth and one thing that can be purchased is leisure time. Now the individual may chose more work (to create more wealth) with his or her time. So perhaps we should have stated that "progress provides more choices" to the individual, but the net result is seemingly the same. It is leisure, after all, that gives the individual the ability to choose ...

There is this from Llewellyn H. Rockwell, Jr., October 2002 ...

Why They Attack Capitalism

To the free market, we owe all material prosperity, all our leisure time, our health and longevity, our huge and growing population, nearly everything we call life itself. Capitalism and capitalism alone has rescued the human race from degrading poverty, rampant sickness, and early death.

--------

As for the rest of the statement, we wrote "if".

Here, a summary of Rothbard's Chapter 1 — Fundamentals of Human Action (Man, Economy and State)

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For those in the Austrian School of Economics praxeology is the logic of human action, and economics is a subdivision of praxeology. Economics itself can be subdivided into (1) actions of isolated individuals ("Crusoe economics") and actions of humans engaged in interpersonal exchange (catallactics) ...

Since time is a scarce resource humans must have a scale of preferences (values) in order to choose what actions to take at any given moment. Humans prefer the shortest time for production to achieve desired ends, the principle of time preference (less waiting time). Humans also prefer for goods to satisfy wants for the longest possible time.

The law of marginal utility (or, more precisely, the law of diminishing marginal utility) states that the ranked value of any good will decline for each additional unit. A second apple will be valued less than the first apple and the third apple will be valued less than either the first or the second. How much less the second apple is valued than the first apple is an empirical fact of subjective value — not a praxeological principle. But it is certainly not true that the first apple is exactly equal in value to the second apple. The greater the supply of the good, the lower the marginal utility. Although water is essential to life, because water is plentiful it is marginally valued less than diamonds, which are far more scarce.

Rothbard completes this chapter on the fundamentals of human action by using the isolated individual Robinson Crusoe on a deserted island to exemplify economic principles ("Crusoe economics"). Crusoe can produce berries by climbing trees and picking berries with his hands. Or Crusoe can bind sticks together to make a long pole that can be used to shake berries from trees. Time that could be spent producing berries (a consumer's good) must be invested in fashioning a pole (a capital good), but the pole may increase Crusoe's hourly production of berries. Capital goods are stored-up labor, land and time. If Crusoe has a very high time preference for berries (is extremely hungry) he may be unwilling to forego immediate consumption by investing time, material and labor to fashion a pole.

Crusoe might also have reduced his berry-picking time by finding a grove of smaller berry trees which did not require climbing to obtain berries. But Crusoe would have no way of knowing whether such a grove exists on his island without investing time and labor to look. In choosing to spend his time fashioning a pole rather than in looking to see if he could find a grove of smaller trees, Crusoe was forecasting that the probability of finding such a grove was low — and that his time was better spent fashioning the pole than searching for the grove — an act of entrepreneurship. Investment in capital goods always involves thinking about the future, which necessarily entails uncertainty.

Crusoe could also invest his time, labor and material resources ("land") building a house that would last 3,000 days. For the first day after being built, 1/3000th of the house is a present good and the rest is a future good. Any expenditure of labor involves foregoing of the good known as leisure.

Comparisons between today's situation and The Great Depression are a bit more complicated than today's feedback and replies would indicate. The "Social Safety Net" and government's refusal to admit that it is unsaveable are together "kicking the can down the road". As are the banks' refusal to follow the law by liquidating "zombie mortgages". Things don't seem as bad as they are because much of the new "money" has been thrown into proping up things that have lost much, and in some cases all of their value, such as the real estate and stock markets, and the completely worthless bonds. Few are homeless, none are unclothed or starving but those may be far from true soon.

New commercial space is being opened on a regular basis in Memphis, yet it has enough empty commercial and warehouse space to run a small country. Yet with interst rates much lower than actual inflation, why not. North central Arkansas has tens of thousands of houses that have been empty long enough that they are actually falling down. The stock and bond markets are high because people don't know where else to put their money. You can only stock up so much food, ammo, and toilet paper before you start to wonder about your own sanity.

DB: That's the pernicious effect of monopoly fiat money and central banking. It changes BEHAVIOR. We're not denying that human action has cultural primacy. We're just commenting on how corrosive money power can be.

BM: This is a tremendously valuable point, and one that I too often neglect.

In the DB interview of David Morgan, he said something similar:

David Morgan: We are moving toward an inflationary depression where money promises are largely maintained yet people become poorer and poorer. Even the "rich" suffer at some point because the quality of life is not money dependent - it is integrity dependent.

Click to view link

Corruption, unethical behavior, and loss of integrity are all characteristics of imperfect man. However, centralized money and credit exacerbate and exaggerate these human shortcomings. Inherently, these characteristics drain wealth - wealth in every form, not just financial.

In one hundred years, the globalization of central banking has virtually destroyed thousands of years of created wealth - call it accumulated culture, for lack of a better, all-encompassing, term. While today's economic world would be unrecognizable to a man from even two hundred years ago, he would be even more shocked at the changed moral and ethical condition.

By this, I don't mean the moral and ethical condition as personified by Lady Gaga. I mean the one as personified by Ben Bernanke. A reasonably educated person from two hundred years ago would easily understand the corrupting effect on society of such money power.

I would respectfully suggest that in regards to the sudden (historically speaking) jump in productivity circa 1800 one would do well to ignore the "money power". Remember that the counterfeiters only destroy wealth - every boom has its bust. In spite of all the destruction the world's central banks cause, human progress and standards of living improved astoundingly. (NAPpy is almost certainly correct in there being some kind of phase shift when a certain minimum of freedom is achieved in various life-domains.) Simply compare world living standards at 1800 with those of today. Central banks had nothing (positive) to do with that. That we don't have 100% Liberty does not discount the material progress that some fraction thereof has been able to produce.

Reply from The Daily Bell

First of all we were characterizing the past 100 years only. Second, you are forgetting about what the dollar is - it's the reserve. People have to hold it to buy oil, or did. It was called a petrodollar because basically it was backed by oil. The difference was that oil was an elastic commodity and the customer demand was almost endless. The US could print almost as much as it wanted and did. Its closest ally, Britain, benefited as well as did Israel.

DB: "Whether or not we have fully understood Dr. North's thinking, we think it is important to emphasize that what we have now is nothing like a real free-market economy - and that we need to move further in the direction of the Invisible Hand, not away from it.

Make the argument that the past century has reaped the full benefits of market capitalism and you run the risk of confusing people. Worst case, you make them more apt to give credence to the arguments of a power elite that has cleverly set just set a trap.

Conclusion: It is easy to fall into it. We should take care we don't."

------------------------------

Hey, here's a thought, elves; Suppose you wrote the above as a feedback at a freedom oriented blog that carried Gary North's addressed article. The editors might reply something like this:


"Our position regarding a sociopolitical environment is less government or even no government.

However, not everyone is in tune with the idea of anarchocapitalism as as viable social orchestration. Just from the standpoint of a historical investigation we find Dr. Norths commentary compelling. The scholarship is broad.

If we simply wanted to assert the deepest argument ourselves, we could simply post an anarchic polemic and be done with it. The Invisible Hand should take care of All.

Logically, we might agree with this, but there is also matter of producing a publication. And thus we will continue to offer thoughtful articles by learned scholars with expertise in various fields - both for the education they provide and the commentary they elicit, including yours."

No offense ...

1. Regarding Coca Cola … Our point was that during a crash and subsequent fallout, companies can lose value based on a lack of consumer demand and overproduction.

Yes, caused by recession/depression where the charts tend to rise and fall over time. But how to explain a sudden crash? Typically by manipulation. I suspect money was removed, is my only point.

2. Assets are not destroyed during a crash? They simply exchange hands? Perhaps so, but when a prudent owner bulldozes a house, that asset is effectively degraded as is the 'value.'

Who would bulldoze a house rather rent it for less? Unless he has plans to invest in rebuilding, a better one.

3. You're not a newbie. Plenty of people read feedbacks and our answers are also aimed at a broader audience, some of whom whom may not understand all you do.

Thankyou and sorry bout the quip.

Reply from The Daily Bell

OK, now we understand what you meant by "removing money." Your point about write-downs is well taken. But so much "stuff" is also destroyed when one of these global bust-ups takes place. Empty homes rot with mold, as do unsold cars - and then are no good. And many other consumer goods and comestibles need to be junked. The destruction is terrific, abysmal. Again, people don't understand because they don't see it. But it happens.

dave jr said:

"Gee, am I a newbie here?"

C'mon dave, have a Coke and a smile. Altogether now: "I'd like to buy the world a Coke and... "

"Remember, Dave, market value is not always monetized but also hypothetical and based on a single trade."

True, but the market value of, say Coca Cola, has little affect on the companies ability to earn a profit. Company performance and market demand governs profitability which in turn governs the percieved market value of the shares. Coca Cola long ago got the money, it is the speculators who live or die in the stock market.

"And a good many assets may be buried in unecessary houses and cars and other consumer goods that end up being destroyed when the boom turns to a bust."

I'll have to disagree with the terminology. The assets are not destroyed. They simply change hands from the over extended to the prudent. Prices are destroyed, but the value then remains for use at lower prices. There won't be wide spread hardship unless the money was removed (then), or turned out to be non-existant (now) and the assets get locked up.

"The money therefore never existed, or is trapped. And when it goes away, people are "poorer.""

We are saying the same thing, but it doesn't answer how much money was moved away, and how much never existed, back then, in the 20's, under a gold standard. But the sequence of events, stock market crash and then a depression and the fact that it was sudden tells me the money was removed.

"That's why a big crash affects the economy as well as securities. You can't necessarily separate the two."

Not even in the twenties?

"Monopoly fiat money printing is so very distortive and ruins so very many lives over time. But in a sense it is a "quiet killer" and hard to understand... "

No arguement here. Gee, am I a newbie here?

Reply from The Daily Bell

1. Regarding Coca Cola … Our point was that during a crash and subsequent fallout, companies can lose value based on a lack of consumer demand and overproduction.

2. Assets are not destroyed during a crash? They simply exchange hands? Perhaps so, but when a prudent owner bulldozes a house, that asset is effectively degraded as is the “value.”

3. You’re not a newbie. Plenty of people read feedbacks and our answers are also aimed at a broader audience, some of whom whom may not understand all you do.

Hyperbole below:

"It seems to us one could make the argument (and we have) that the entire 20th century and now the 21st has been the product of this sort of monetary stimulation"

How can a century be the product of monetary stimulation?
Time cannot be the product of monetary stimulation.

Probably a gramatical error,but the error helps exaggerate your exclusion of human action, which takes place in spite of monetary inflation.

Reply from The Daily Bell

You are grumpy and must have made a bad trade. You want to claim that human action persists despite monetary debasement. But that is NOT what we are arguing. We are simply pointing out that Money Power has a big impact on human behavior. Human action continues as it must; but that human action is often channeled into non productive avenues such as public schools, the military-industrial complex, the penal-industrial complex ... even the Wall Street nexus of bad behavior and monopoly capitalism.

As for your accusations of hyperbole ...

1. Hyperbole has nothing necessarily to do with grammatical error.

2. While we try to be exact, our answer was a bit relaxed ... but we're sure people who read it got the point.

Sorry about that trade.

"Given the size of the Crash, one might speculate the money printing of the 1920s was even more agressive than today,"

Perhaps, maybe. It seems more plausable that the money went somewhere. And a stock market crash won't bring down an economy nearly so quickly as an economy can bring down a stock market.

Reply from The Daily Bell

Remember, Dave, market value is not always monetized but also hypothetical and based on a single trade. And a good many assets may be buried in unecessary houses and cars and other consumer goods that end up being destroyed when the boom turns to a bust. The money therefore never existed, or is trapped. And when it goes away, people are "poorer." That's why a big crash affects the economy as well as securities. You can't necessarily separate the two. Monopoly fiat money printing is so very distortive and ruins so very many lives over time. But in a sense it is a "quiet killer" and hard to understand...

I think it is important in this context to remember that even though ours is what Mises called a 'hampered market economy', is is still a market economy. It has created a great deal of wealth in spite of the pernicious influence of central banking and the over-regulated overbearing nanny state. In order to understand how this is possible - today, perhaps 20 to 30% of the population are actually actively creating wealth and are involuntarily keeping the entire show on the road - one must remember how powerful the market is. For instance, in the old Soviet Union, just 2% of the arable land was privately owned, but produced almost the country's entire supply of fresh vegetables and fruit. Even just a little bit of economic freedom will have outsized effects.

And in the twenties we were still on a gold standard, albeit with a cheating Fed...

Reply from The Daily Bell

Yes but Fed officials didn't observe it. That was part of the problem. They printed as much as they chose and then persuaded Roosevelt to shut down the banking system to ensure they wouldn't be found out. Given the size of the Crash, one might speculate the money printing of the 1920s was even more agressive than today's.

The roaring twenties came on the heels of Ford's cheap automobile and gas powered tractors. Efficiencies increased all around. Yes the over investment was due for correction, but it took a big drain, investing in Germanys' war machine, to facilitate a crash, and government policy to drive it into depression.

"The greatest unanswered question of modern history is how this compound economic growth started when it did and where it did: Great Britain and the United States. But it did, and the world changed. ["ever since 1800"]"

Sudha Shenoy makes the hypothesis that it was the slow accumulation of capital as an emergent phenomenon (like language or law) based on human action (but not centrally planned):

Click to view link

I'd add a second hypothesis that England and the U.S. reached some minimum level of property rights, also as an emergent phenomenon. I'd also add a third hypothesis, that "respect" or "adherence" to contract law reached some minimum level as well.

Reply from The Daily Bell

We'd add a fourth hypothesis, that Money Power was lurking somewhere in the background. We're just not sure how it fits in.

So human action = zero?
DB you've been pretty far out lately.

Reply from The Daily Bell

Huh? Oh, come on. You work on Wall Street. Hand out millions of dollars in a small area and see if people's behavior changes ... That's the pernicious effect of monopoly fiat money and central banking. It changes BEHAVIOR. We're not denying that human action has cultural primacy. We're just commenting on how corrosive money power can be.