Tuesday 30 April 2013

Faking austerity in the Eurozone

Friend Keith Weiner points out that all the mainstream pundits say "austerity does not work." What they don't admit it is that it hasn't been tried yet:

The fatal flaw of “Three Strikes”

Opponents of the Three Strikes Law are up in arms that

When National passed its “three strikes” legislation in 2010, they promised that it would not be like California’s, and target shoplifters, drug dealers, and other petty criminals. Instead, it would be used on “the worst of the worst.” Throughout the debates (which are linked to from here), they repeatedly referred to “the worst murderers”, the “worst serious violent offenders” and the “worst” sexual offenders. So who are actually they using it on? Dumbarse muggers … like Elijah Akeem Whaanga, 21, [on] his second strike; Judge Tony Adeane told the Hastings man his two “street muggings” that netted “trophies of minimal value” meant his outlook was now “bleak in the extreme.” “When you next steal a hat or a cellphone or a jacket or a skateboard you will be sent to the High Court and there you will be sentenced to 14 years’ imprisonment without parole,” Judge Adeane said.

“If our legal system thinks that this dumbarse is among ‘the worst of the worst,’” says Idiot/Savant, “or that his crimes merit 14 years imprisonment without parole, then it is fundamentally disproportionate and unjust… [violating] the Bill of Rights Act’s affirmation of freedom from disproportionately severe treatment or punishment.”

In response to this tirade of opposition objecting to the dumbarse’s bleak future under the three-strikes regime, defenders of the law look forward to this predator being caged, saying

this is precisely the kind of person the three strikes law is supposed to protect us from. This young man has terrorised multiple victims on multiple occasions. He has already received jail-time and a first strike. He is clearly not going to stop…
The entire point of the three-strikes legislation is completely ignored by most commentators. The purpose of the legislation is not to bring justice, punish or even deter the criminal. The entire purpose is to protect the public from predatory wolves. After the third act of violence, we can be sure that Mr Whaanga will continue to be a dangerous predator, barring some sort of miracle.

Neither the opponents nor the defenders of Three Strikes seem however to have spotted what can only be described as a fatal flaw of the legislation, which I pointed out when it was introduced: that rather than protecting the public it offers the offender a clear inducement to savagery. Because if this violent dickhead now stands to get 14 years’ imprisonment without parole for stealing “a hat or a cellphone or a jacket or a skateboard,” then why wouldn’t he murder for them? Or rape? Or terrorise?

Why wouldn’t he, when the sentence for these crimes these days is virtually the same (for someone with his obviously low time-preference) as the one with which he’s been threatened?

The three strikes law has a fatal flaw. But it will I fear be some innocent victim who experiences the fatality.

The (First) Hooey From Helengrad

Since this government, at the invitation of its coalition partner, has opened the door to a “constitutional conversation”  that is rapidly emerging as a Treatyist monologue, I thought it might be interesting to post my on-the-post report from the last time a government set out to have the Treaty of Waitangi incorporated in a written constitution—back in early 2000, in the first months of the new Helen Clark Government. 
Curiously, back then, all the usual Treatyist suspects were agin’ incorporation since, they said, it would “confine” the Treaty. I invite you to consider what’s changed since then … 1

The Hooey From Helengrad
(originally written for The Free Radical
magazine, 2000)

In almost the first breath of her maiden speech, new Attorney General Margaret Wilson boasts she will amend this country's constitutional arrangements. With almost the first breath of this new government a debate is organised in parliament to discuss 'Building a Constitution.' Can any one doubt that these two events are linked?

Whatever the reason for them being gathered there in the Parliament Buildings for this auspicious yet hastily-assembled event— and many confessed to being more than a trifle unsure themselves what was afoot— 117 official 'invitees' four Maori gate-crashers and your lonely reporter took part in the conference. Wilson's former employer, the University of Political Correctness at Waikato, was itself well represented at the hui, as were other 'leading academics' such as Jane Kelsey, 'respected jurists' such as Eddie Durie, enough former Ministers, Prime Ministers and Governors General to form a faded sort of portrait gallery, along with tangata whenua with “real mana” such as lawyers Moana Jackson and Annette Sykes, and councillor and gate-crasher Atareta Poananga.

The large number of brown faces present — not all of them invited — contrasted with the extremely small number of people there who were not sucking off the state tit in some way.

I counted ten. At most.

Outside, a Libertarianz welcoming party including an eight foot high Statue of Liberty greeted invitees. To symbolise Wilson’s intent, liberty was suffocated with a giant condom. Inside, as a reminder of the power a good constitution is supposed to tie up, those attending could contemplate decorative pilaster panels displayed gorgeously rendered 'fasces,' the bundled stick motif adopted by the Romans and used ever since as a symbol of absolute political power. The contrast — to me at least — was striking.

For power was certainly on the agenda, or at least how to dole it out, and liberty was, as we suggested — largely uninvited to proceedings.

There was much criticism of the conference, ranging from Professor Jon Jensen, who called it a 'covert Waitangi plot'; to David Round: "If these overpaid mischief makers are allowed to drag our constitution off in their direction then New Zealand is finally stuffed"; to Roger Kerr: "If it ain't broke, then don't fix it"; to Annette Sykes: It's all a colonialist plot to hegemonise Maori (or something similar).

Margaret Wilson's view is that the 'accepted units' of constitution building are cultures, not individuals; that the fiction of “group rights” outweighs the substance of individual rights. The many calls for Maori sovereignty would not have disappointed her, but there were astonishingly few who favoured incorporating the Treaty into any new constitution. Geoffrey Palmer was one exception: "If the treaty is in a written constitution,” he puffed, “then it can protect rights against the legislature." Doug Graham by contrast: "We shouldn't incorporate a law that is so open to misinterpretation." Such incorporation, said Shane Jones, might of course “tie down the Treaty's mana' as a 'sacred covenant”—or as Ngatata Love said "I say what my tikanga is, not the law." (Translation: if law is clear and objective, then witchdoctors won't be paid a fortune to give this week's interpretation of ill-defined concepts like 'taonga.')

Roger Kerr stood athwart Wilson’s would-be juggernaut, arguing: "The basic issue is not brown versus white, but the individual versus the collective." Annette Sykes spoke in response for the brown collective, decrying a world which contrasts the "western 'one' and the non-western 'many.'" She proposed instead a balkanised apartheid state where 'the many' would be controlled by a 'hapu paradigm,' with all power shared amongst hapu leaders, who have a 'fluid' approach to power. No one mentioned Bosnia.

There were outnumbered voices I occasionally agreed with, often with some surprise. Tipene O'Regan: "All states commit theft. A constitution should protect us from that." Tom Lamby, Jonathan Darby, Rod Deane, Peter Shirtcliffe, Stephen Franks, and of course Roger Kerr each in his own way said that many are saying of government 'what are they going to do to us next?' and that consequently there is a need to limit government to stop it stepping on us. We should have one rule of law for all, they affirmed, with liberty and individual rights protected, and contracts upheld. Sykes’s response to this line was an eruption: "If we promote individual rights, then we can forget about our collective responsibility to the unborn"! Moana Jackson told us all that property rights are a myth, dreamed up and used to subjugate Maori. No one mentioned Zimbabwe, but Simon Upton at that point leapt to his pen, no doubt excited to hear an echo of his own previously expressed notion that rights are merely 'social constructs.'

A similar view of rights wasn't the only thing shared by these two — Upton spent the afternoon enthusiastically excavating his nasal cavity while wiping his trophies on his seat. Occupying that seat later on was Moana Jackson, gripping the sides fiercely as he no doubt treasured the many things he now shared unwittingly with Simon.

The most heated session took place over the issue of local government. Unsurprisingly, the head of Local Government Ross Jansen came out strongly in favour of bigger local government. Kerr and Franks came out strongly against, the latter describing Jansen's proposals as "a breathtaking crystallisation of the level of naivety that characterises much of this conference — and if that gives offence, I intend it!" It did give offence, and he was drowned out by the Jansenists. No one mentioned Adrian Chisholm, but by then no one could pretend they didn't know how big local government had smacked this man, because Chisholm was there thrusting into as many hands as he could shake copies of Deborah Coddington's Free Radical story showing what Auckland’s unrestrained council officers had done to him.

But in the end there was neither heat, nor light on display at the Hooey. Just mush. The overall impression of the event, as one participant said, was that it was not actually a debate at all – merely lots of people talking past each other. There was an aimlessness to the whole affair, a sort of purposeless action that suggested the purpose itself was contained somewhere else; that what we were seeing was a giant trial balloon, a test to see how well the issue would go over.

It did not appear to go over well, Clark conceding at the conclusion "that we're acting in the absence of any compelling demand to do anything".

Let us maintain our vigilance.

This post originally appeared in issue 41 of  The Free Radical magazine, 2000. It has been lightly revised.

PS: If enough of you are interested, I’ll pull out what I called “The Speech They Didn’t Want to Hear” that I tried to deliver on the day. Naturally however, they didn’t want to hear it.

* * * * *

1. Mostly, the confident assurance of the Treatyists that under current arrangements, the Treaty will end up confining what one would normally expect of a constitution.

Monday 29 April 2013

Len Brown is right, and wrong.

Len Brown wants to whack on either central-city tolls, motorway tolls or petrol taxesto plug a $12 billion funding gap and fix the city’s ever-growing traffic jams.”

Len thinks users should pay for the costs of roads, and in that he’s dead right.

But as the Affordable City ticket for the upcoming council elections points out,

Yes, users should pay for the cost of roads. But what we're already paying should be enough.

Why I won’t be buying the govt’s shares

Even if it does go ahead, I won’t be buying shares in the government’s non-privatisation1 of electricity generators.

Why?

Well, in the first instance, David Shearer and Russel Norman have demonstrated that what can be created with politics can also be killed with it. Says Oliver Hartwich,

Practically from one second to the next, and with no previous warning, let alone any kind of meaningful stakeholder consultation, the rules of the energy market were called into question… The strong public reactions to the proposal, as well as the substantial losses for energy companies listed on the NZX, show what a bombshell of an announcement it was.

So desperate are these two political hyenas to mark out their territory, they don’t care whom they hurt. Because what Norman proposes (to which Shearer agrees) is a single state buyer along the lines of the single-buyer model NZers endured in the 1970s, back when we enjoyed rationing, blackouts and (as this report shows on page 19)3 prices increasing 58% in the period from 1975 to 1979.

On the other hand, though, what does National’s plan consist of—even if it hadn’t already been disrupted?

Well, given that it’s neither freeing up the non-market for electricity2 nor privatising the generators,1 all it’s proposing is selling shares in what will remain state-owned companies.

Or, to put it another way, it’[s offering you the chance to buy into a government department with the power of coercive monopoly—with all that implies.

No thanks.

* * * *

1. Selling less than a majority means they will remain state-owned. Only in Russel Norman’s dictionary is this privatisation.
2. What Max Backward set up in the nineties was not an open market in electricity—it was a closed market in which entry was, and still is, restricted to those who’d acquired government favour. “Electricity in New Zealand has NOT
been deregulated, and it sure hasn’t been privatised. Bits of it have been, but most has been effectively nationalised. To understand this, one needs to trace the history of electricity reform in the past twenty-five years.”[Read ‘Power for the People’ on page 38 of the July 2006 Free Radical magazine]
3. Hat tip Kiwiblog.

The War on Drugs is a Failure

..we don’t treat alcoholics like this.  Starring Chris Christie, Ron Paul, and the dubious powers of Autotune.

“…to whenever castration and office has been…”

OFFICER (giving order): “Send reinforcements, we’re going to advance.”
N.C.O. (passing on order): “Send three and four-pence, we’re going to a dance.”

What happens when two of the most popular digital voices speak to each other? Artist Michael Silber asked Google Voice and Siri to talk to each other. Chinese whispers has nothing on this:

[Hat tip Noodle Food]

Racial privilege, or one law for all?

image

The so called “constitutional conversation” initiated by the Racist Party in their coalition deal with Nation is less about discussing a constitution than it is about entrenching racial privilege the Treaty, right down to “implementation of [fraudulent] Treaty principles in the workplace.”

Canterbury University's David Round argues the point with the Racist Party’s Te Ururoa Flavell on Sunday’s Q+A:

image

Wednesday 24 April 2013

ANZAC EVE: War and Peace

War appears to be as old as mankind, but peace is a modern invention.
      - Sir Henry Maine (1822-88)


Charles Sargeant Jagger's Royal Artillery Monument at Hyde Park Corner, London

“IT IS WELL THAT WAR is so terrible,” said General Robert E. Lee after the slaughter at Fredericksburg, “otherwise we should grow too fond of it.” *

But fond of it humans have been for most of our history. Far too fond. For thousands of years war has been an intrinsic part of the social and political order, with armed conflict across the known world the accepted method by which ambitions are achieved and ideologies established.

Peace is a relatively modern invention, whereas might has made “right” for millennia.

Peace proper really only broke out worldwide for the first time, for any length of time, in the globalised trading world that broke out after the tragic Napoleonic & French Revolutionary Wars  of 1790 to 1815. Thereafter began, for nearly a century, the freest and most peaceful period the world had yet seen. ** Watching peace break out as global trade burst forth, economists like Frederic Bastiat drew the lesson for the rest of us:

Where good don’t cross borders, armies will.

And where they do, it’s in the best interests of would-be belligerents to jaw, jaw, not war, war.

IT TOOK MORE THAN mere wishes to change that tragic history. It was not simple pacifism that did it. (We might remember George Orwell's observation of English pacifists that pacifism is a doctrine that can only be preached behind the protective cover of the Royal Navy. And where such protective cover was lacking, things ended badly for all who tried it.)

It was only the realisation (developed over many centuries) that the interests of human beings are essentially harmonious that eventually allowed the “invention of peace”—however sporadic has been its application since.

Wars are neither natural events nor accidents, like earthquakes, landslides or hurricanes. Like economic depressions, totalitarian dictatorships and murder by concentration camp, wars are neither acts of nature nor 'Acts of God': Wars are acts of man -- of men who seek to achieve their values by violence, resisted only by those who rise to defend their own lives, their values, and their sacred honour.

imageWars are the result of aggression by those who see value only in force, and who see other human beings as chattel… In short, war is the second-worst thing on earth—second-worst only because the very worst is tyranny, an act of war by governments against those they are supposed to protect. It is tyrannical governments and movements intent on inflicting tyranny and oppression against others that begin wars of conquest and campaigns of terror. It is the existence of such entities that make wars of self-defence necessary.

When such tyrannies exist and are allowed to exist, then peace without justice is not true peace. Peace without justice rewards the tyrannical and is an injustice to those they enslave and kill. As long as some human beings choose to deal with other human beings with the whip, the chain and the gun -- with stonings, fatwahs and holocausts -- with the torture chamber, the dungeon and the gulag -- as long as some men continue to enslave and attempt to enslave others, then wars will continue to happen, and we will continue to need to be ready to defend ourselves.

If we have things worth living for, which we do, then for that much at least we all have things worth defending. As Thomas Jefferson observed over two-hundred years ago, the price of liberty is eternal vigilance. Two-hundred years later, nothing has changed.

THE INVENTION OF PEACE required not just the rejection of force, but the rejection of statism.

Statism—in fact and in principle—is nothing more than gang rule [argues Ayn Rand]. A dictatorship is a gang devoted to looting the effort of the productive citizens of its own country. When a statist ruler exhausts his own country’s economy, he attacks his neighbours. It is his only means of postponing internal collapse and prolonging his rule. A country that violates the rights of its own citizens, will not respect the rights of its neighbours. Those who do not recognize individual rights, will not recognize the rights of nations: a nation is only a number of individuals.
   
Statism needs war; a free country does not. Statism survives by looting; a free country survives by production.
   
Observe that the major wars of history were started by the more controlled economies of the time against the freer ones. For instance, World War I was started by monarchist Germany and Czarist Russia, who dragged in their freer allies. World War II was started by the alliance of Nazi Germany with Soviet Russia and their joint attack on Poland.
   
Observe that in World War II, both Germany and Russia seized and dismantled entire factories in conquered countries, to ship them home—while the freest of the mixed economies, the semi-capitalistic United States, sent billions worth of lend-lease equipment, including entire factories, to its allies.
   
Germany and Russia needed war; the United States did not and gained nothing. (In fact, the United States lost, economically, even though it won the war...) Yet it is capitalism that today’s peace-lovers oppose and statism that they advocate—in the name of peace.

image

Guards of the Dead by Austrian sculptor Franz Metzner, in the Crypt of the Monument to the Battle of the Nations created to commemorate the battle that was the beginning of the end for Napoleon’s dictatorship, after whose fall Europe enjoyed nearly a century of (almost) laissez faire and its longest interlude of peace ever … before the rising tide of statolatry and aggressive nationalism combined to create another bloodbath.
Ironically, the monument itself was built to commemorate the victory of the people over an oppressive ruler —but in commemorating the victory of ‘Der Volk”  it became for some a commemoration of the maturation of the Germans as an organised ethnic group, and hence was to become the locus of the same aggressive nationalism “the people” had opposed, but this time in German garb.

image

AGREEING WITH THIS PRESCRIPTION was Austrian-born economist Ludwig Von Mises, who despite his best efforts saw more than his share of war and its results up close. The invention of peace, he wrote in 1949,

can only come about with the rejection of the roots of war. Which is to say, to reject the spirit of conquest and the notion that values can be attained through aggressive government action; which is to say, to reject statolatry—which is to say, to reject the warrior code and embrace the code of the trader…

Total War:
The market economy involves peaceful cooperation. It bursts asunder when the citizens turn into warriors and, instead of exchanging commodities and services, fight one another…
War and the Market Economy:
Of course, in the long run war and the preservation of the market economy are incompatible. Capitalism is essentially a scheme for peaceful nations. But this does not mean that a nation which is forced to repel foreign aggressors must substitute government control for private enterprise. If it were to do this, it would deprive itself of the most efficient means of defence. There is no record of a socialist nation which defeated a capitalist nation. In spite of their much glorified war socialism, the Germans were defeated in both World Wars.
    What the incompatibility of war and capitalism really means is that war and high civilization are incompatible. If the efficiency of capitalism is directed by governments toward the output of instruments of destruction, the ingenuity of private business turn out weapons which are powerful enough to destroy everything. What makes war and capitalism incompatible with one another is precisely the unparalleled efficiency of the capitalist mode of production.
     The market economy, subject to the sovereignty of the individual consumers, turns out products which make the individual's life more agreeable. It caters to the individual's demand for more comfort. It is this that made capitalism despicable in the eyes of the apostles of violence. They worshiped the "hero," the destroyer and killer, and despised the bourgeois and his "peddler mentality" (Sombart). Now mankind is reaping the fruits which ripened from the seeds sown by these men…
The Futility of War:
imageWhat distinguishes man from animals is the insight into the advantages that can be derived from cooperation under the division of labour. Man curbs his innate instinct of aggression in order to cooperate with other human beings. The more he wants to improve his material well-being, the more he must expand the system of the division of labour. Concomitantly he must more and more restrict the sphere in which he resorts to military action. The emergence of the international division of labour requires the total abolition of war. Such is the essence of the laissez-faire philosophy...
    This philosophy is, of course, incompatible with statolatry. In its context the state, the social apparatus of violent oppression, is entrusted with the protection of the smooth operation of the market economy against the onslaughts of antisocial individuals and gangs. Its function is indispensable and beneficial, but it is an ancillary function only. There is no reason to idolize the police power and ascribe to it omnipotence and omniscience. There are things which it can certainly not accomplish. It cannot conjure away the scarcity of the factors of production, it cannot make people more prosperous, it cannot raise the productivity of labour. All it can achieve is to prevent gangsters from frustrating the efforts of those people who are intent upon promoting material well-being.
    The liberal philosophy of Bentham and Bastiat had not yet completed its work of removing trade barriers and government meddling with business when the counterfeit theology of the divine state began to take effect. Endeavours to improve the conditions of wage earners and small farmers by government decree made it necessary to loosen more and more the ties which connected each country's domestic economy with those of other countries. Economic nationalism, the necessary complement of domestic interventionism, hurts the interests of foreign peoples and thus creates international conflict. It suggests the idea of amending this unsatisfactory state of affairs by war. Why should a powerful nation tolerate the challenge of a less powerful nation? ….
    Such was the ideology of the German, Italian, and Japanese warmongers. It must be admitted that they were consistent from the point of view of the new  teachings. Interventionism generates economic nationalism, and economic nationalism generates bellicosity. If men and commodities are prevented from crossing the borderlines, why should not the armies try to pave the way for them?
    From the day when Italy, in 1911, fell upon Turkey, fighting was continual. There was almost always shooting somewhere in the world. The peace treaties concluded were virtually merely armistice agreements. Moreover they had to do only with armies of the great powers. Some of the smaller nations were always at war. In addition there were no less pernicious civil wars and revolutions.
image    How far we are today from the rules of international law developed in the age of limited warfare! Modern war is merciless, it does not spare pregnant women or infants; it is indiscriminate killing and destroying. It does not respect the rights of neutrals. Millions are killed, enslaved, or expelled from the dwelling places in which their ancestors lived for centuries. Nobody can foretell what will happen in the next chapter of this endless struggle.
    This has little to do with the atomic bomb. The root of the evil is not the construction of a new, more dreadful weapons. It is the spirit of conquest….
    Modern civilization is a product of the philosophy of laissez faire. It cannot be preserved under the ideology of government omnipotence. Statolatry owes much to the doctrines of Hegel. However, one may [perhaps] pass over many of Hegel's inexcusable faults, for Hegel also coined the phrase "the futility of victory" (die Ohnmacht des Sieges).
    To defeat the aggressors is not enough just to make peace durable. The main thing is to discard the ideology that generates war.

In sum:

“If men want to oppose war, it is statism that they must oppose. So long as they hold the tribal notion that the individual is sacrificial fodder for the collective, that some men have the right to rule others by force, and that some (any) alleged “good” can justify it—there can be no peace within a nation and no peace among nations.”
- Ayn Rand, “The Roots of War”

* * * * *

* Lee himself was so fond of it, he was happy to have the slaughter he helped promote, the American Civil War, continue for three more years after Fredericksburg!
** I say “relative peace” because the world still endured the Crimean War, the American Civil War, and scores of imperialistic wars of conquest. But no wars spanned the known world, which meant for the first time on the planet, the majority of people on the globe experienced peace rather than almost continual war. And this century of  near-peace was when the modern world was born.

Getting to grips with the world’s most libertarian sport

NOW THAT AFL IS finally coming to New Zealand, coming in its full-on, playing-for-points zeal,* NZers will begin to get some inkling of the obsession fans have with this absorbing sport played out on a huge stage—a sport that every commentator agrees is best seen live.

Time then to get to grips with the world’s most libertarian sport.

Why do I call it that?

Because at root all the rules, and they are very few, are designed to keep play moving, to protect the bloke going for the ball, and to stop anyone initiating force against anyone else. Unless they’re Dermot Brereton.

Simple, huh?

So in two hours of footy, you get two hours of footy.  Not ten minutes of action and several hours of standing around watching blokes blowing hard (like you get in some games I could mention, ahem**). Like, where’s the pleasure in that?

The aim of the game is to stop whistle-happy Hitlers from destroying it. Oh sure, they try. But they’re not the main event. Most followers of the game don’t even know their names (unless their name is Chelsea Roffey).  They refer to them simply as: 'white maggots'.

The rulebook itself is a pocket-sized A6 with only pages, most if it telling you how to mark out the ground and to restart the game when the ball leaves the oval. (Did I mention the ground is an oval, so there’s no corners to get bottled up in.)

The book is made small enough to stick in your pocket so that even white maggots and Collingwood fans have no excuse for not knowing the rules. The guts of it is the 'Spirit of the Laws,' which is barely fifty words telling you how to tackle (between knees and shoulders, please, and don’t touch the head); not to drop or throw the ball even if you are tackled (which is why players use either a kick or a handball to pass); and not to take a ball into a tackle if you’ve had a prior opportunity to get rid of it. Oh yes, there are big hits, as you can see here, but while the Sydney Swans reckon they play like the All Blacks, the game is designed for blokes who run around their opposition, not for for blokes who like to run into them.

And the game just keeps going so fast there’s barely even time to go to the bar, except the breaks between quarters. It keeps going because there’s no offsides, no long stoppages every time someone knocks the bloody ball on or shepherds someone else near the ball (there’s no rules against either), and when the ball goes out or gets tangled up its re-started with a simple but exciting ball-up. 

Really, the only time the game stops apart from occasional free kicks is when some bloke pulls down the Sherrin from the sky—at which point even the supporters of the other team will rise up in acknowledgement of greatness.

Unless it’s in a Grand Final.

So, simple rules for the world’s most exciting and liberating code of football. (Simple, because Australians have to be able to understand them.)***

I draw four pretty simple conclusions from this: the fewer stoppages, the better the game; protection of individuals is a good basis for keeping things flowing; the fewer interventions from maggots the better; and, all else being equal, simple laws are usually best.

The result is what you see on the park: magic, excitement, and the spontaneous order that develops when the shackles come off.

Just like libertarianism.

Someone observed once that the Ten Commandments was supposedly written on one piece of stone, the US Constitution on ten pages of parchment, but that European Union regulations on bananas are smeared across four volumes - and no one, not even the bureaucrats - and especially not the banana growers - can understand them.

We're not much better here in this country, with about 4000 pages of new regulations introduced by our trigger-happy parliamentarians every year. We're going wrong off the park, and it's time to stop it.

Good law, I suggest, is not pages and pages of empty verbage, but is clear, and terse, and based around simple, easily understandable, objective principles. Simple principles that recognise each individual's right to live and to act for his own sake, and that stop anyone initiating force against any other individual. Something like this:

We hold these truths to be demonstrable in reality: that because the mind is our species' means of survival and full flourishing, human beings are individually possessed of certain inalienable rights, which are the rights to life, liberty, and the pursuit of private property and happiness; that to secure these rights, governments are instituted among people, deriving their just powers - and only such powers - from the consent of the governed; that all laws legislated by governments must be for the purpose of securing these rights; that no laws legislated by government may violate these rights; that all citizens are equal before such laws; and that whenever any government becomes destructive of these rights, it is in rebellion against its citizens, who may then remove it and institute new government.

Simple, timeless principles - with a certain debt to Thomas Jefferson. These principles come from a proposed Constitution for New Freeland drawn up several moons ago by some smart chaps and chapesses, among whom might have been Deborah Coddington (which is interesting, don’t you think). Simple rules that tie up the govt, and attempt to ensure that for your three score and ten years of life you get to go hard for three score years and ten, and not get bogged down in a morass of rules, restrictions, and government revenue-gathering.

The purpose of such a constitution (and the original purpose of the US Constitution) is to tie up the govt, not to tie up the game; to tie up the referees, so that - as with Aussie Rules - the govt's whistles are only blown when someone is inflicting force on someone else. To restrict govt, in other words, to protecting me from you, and you from me. And that's it.

This is a very simple idea: The idea that my freedom ends where your nose begins (and if you look carefully at my photograph above, you will see that some of us do get more freedom than others). This is a very simple idea, one easily expressed in law, and possibly the most important idea you will ever hear.

But simple truths still need to be understood. To argue for these simple ideas, we must first understand them. The realisation that you have a right to live for your own sake has been lost in the US. As bad as this is, its constitution - great, simple, and small as it was - has been buried in the process.

I make two recommendations. The first: that  New Zealand's laws be made simple, objective, principled, constitutional- and minimal in their intrusion into the lives of New Zealanders. (And you all make a point of telling that to the governments travelling dog-and-pony constitution roadshow). The second: that we slow down on the rugby and start playing (or at least watching!) more Aussie Rules.

Although the Australians would beat us more than we’d like, we could hope that at least the bloody French don’t do it so often!

See you at the ground!

PS: Read up on the great game here:

* * * * *

* Well, if “zeal” is really the right word to describe the way St Kilda is presently playing.

**  In  the average eighty-minute game of rugby now, you're lucky to see thirty-five minutes of action - the rest is players walking around, kicking for position, preening for the cameras, spitting on the ground, and arguing with the referee about the rules (can anyone actually follow all the rules in the rulebook, and agree with anyone else about what they all mean?)
     It’s even worse if there’s a northern hemisphere ref on the park. In that case, you're lucky to see any decent action at all - apart from arguments with him.
   American “Football” is even worse. The 2001 Superbowl won by the Baltimore Ravens was probably the most boring game of any code of all time - barely 18 minutes of action over 3 hours!! And grid iron, as anyone knows who has ever tried to follow it, is truly a complicated game.

*** So simple there’s mostly easy to understand. Well, except that no-one—not even the umpires—understand the new law banning sliding into a players’ knees.  But what can you do when an the game’s Rules Committee is so passionately dedicated to stuffing up its game?

A suit [updated]

Conservative Party leader Colon Craig has sued satirical website The Civilian for “misquoting” him to make him look ridiculous.

Responding to the suit, the satirist apologised saying

We would never dream of making Mr. Craig look ridiculous. Indeed, we’re quite content to leave that up to him…. We look forward to future legal notices from you regarding [other] articles, in which we also appear to have misquoted several other politician.

Despite appearances, Colon does have a sense of humour.  It just takes this to see it [HT David Slack]:

 

UPDATE: Cry “Havoc!” and unleash the hounds of satire!  Dim Post interviews Colon Craig, lathered with soap in his new pleasure dungeon.

‘I bought this place to relax,’ he explains…

Working for the government…

[HT Kelly McNulty Valenzuela]

Tuesday 23 April 2013

DOWN TO THE DOCTOR’S:

This week Libertarianz  leader Dr Richard McGrath tears strips from Peter Dunne and Russel Norman. Surgically.

1. Watermelon Coalition’s Plans For Electricity Monopoly are 'Economic Dyslexia'

Leaders of the Red and Green parties Russel Norman and David Shearer have a not-so-cunning plan to further nationalise the electricity sector.

The suggestion by the Watermelon Coalition to set up an electricity wholesaler run by politicians smacks of economic dyslexia.

The current electricity “market” is already almost entirely government-run, with three of the big four retailers and the national grid operator still state-owned enterprises.  This is a market which lacks virtually everything that would make it an actual market.  But that’s still not enough for the Watermelon Coalition.

Many don’t realise it, by the pseudo-reforms put in place by the National Party when in government did not deliver a free market in electricity supply. Rather, it maintained the government's dominance in this crucial market. The not-for-profit model of Power Boards was replaced by the SOE model with little or no discernible benefit for consumers. [Read ‘Power for the People’ on page 38 of the July 2006 Free Radical magazine]

The way to get retail electricity prices down is to reduce barriers to entry and allow new players into the market to expose the state-owned dinosaurs - Genesis, Meridian and Mighty River - to increased levels of competition. Rather than putting politicians in control of the electricity market, power companies should be allowed to put pressure on each other to better serve their customers. The consumer - not the politician - should be king.

The suggestion that an entity called “NZ Power”’ award themselves a monopoly on the purchase of generated electricity at a 'fair' price and magically deliver cheap electricity to the people is just  pure Marxist fantasy.

You know, whenever a politician drops the word 'fair' into a sentence, it invariably refers to a centrally planned command-and-control economy of which Rob Muldoon and Chairman Mao would be proud. People should run a mile from such charlatans.

If Opposition co-leader Russel Norman wanted a sustained drop in electricity retail prices, he would be advocating the government end its interference in the energy sector. His 'NZ Power' plan is aptly named - it's all about more power for statist politicians, and less power for common New Zealanders.

Any reduction in electricity prices based on the flawed and out-dated theories of Lenin and Marx will be short lived, require massive subsidisation and be open to political manipulation.

In the same breath as they talk about cheaper prices, the Greens also talk about price hikes when a household's use of electricity rises above a certain level, in the interests of something Russel Norman calls 'efficiency'. That sort of we-know-best ideology is poison to New Zealanders who value their freedom and the ability to make choices for themselves.

However, I don't hold out any hope that this National-led administration are interested in reforming the electricity market—with few exceptions, they abandoned any pretence of limiting the scope and power of government over individual Kiwis long ago.

2. Peter Dunne-Nothing

Peter Dunne wants to kill off charter schools, along with any hope of a decent education for many Kiwi kids. His dramatic about-face on charter schools shows he is little more than the Teachers Council's tame poodle.

Charter schools promote competition in education, and challenge the stranglehold by teachers' unions over what choices are available to parents and their children.

Our party remains firmly in favour of giving parents and children the right to decide how they are educated. Peter Dunne's backsliding, gutless treachery and total surrender to the teachers' unions is typical of his party's unprincipled populist stance on virtually every important issue.

He is clearly more interested in keeping in with the NZEI and other voting blocs than in letting New Zealanders choose a style of teaching for their children that is remotely at variance with the one-size-fits-all teacher-centric state education system.

Peter Dunne, you are now owned by the teachers union - I hope you are proud of your abandonment of those children doomed to failure in the current politically correct, inflexible and increasingly useless network of detention centres for the young.

There are some wonderful teachers out there who could do achieve so much good working in schools specialised to the needs of their pupils. Unfortunately, such teachers are constrained by the rules of their protectionist trade unions and training bodies who are terrified of losing their tightly-held monopoly on teacher qualifications and jobs--along with losing all those billions of dollars of taxpayer funding thrown at the government’s factory schools.

Teacher qualifications are a smokescreen being utilised by universities, NZEI and PPTA to disguise an undignified grab for money and power that Dunne is now aiding and abetting.

If charter schools are so bad, why not give them a limited trial for a year or two in order to to demonstrate just how terrible they are? Yet the education establishment is fearful of any competition and clearly view the prospect of charter schools with considerable alarm, as their own deficiencies are likely to be exposed to public scrutiny.

Peter Dunne appears to forget that in a free education market, bad and incompetent teachers and school are more likely to be ruthlessly and rapidly weeded out, as pupils and parents can more easily vote with their feet and take their education funding elsewhere if they are unhappy with a particular school.

The bottom line is not what letters a teacher has after his or her name, but whether he or she can engage with pupils and keep them keen to learn and hungry for knowledge. Such skills aren't learnt at teacher training colleges and universities. And having a politically driven national curriculum which propagates, for instance, the fiction of the “principles” of the Treaty, or the nonsense of anthropogenic global warming, both so wrong as to be bordering on criminal.

It is imperative that the education market be opened up in every way; that children cease to be political pawns; and that power and funding be wrested away from teacher unions and training colleges and placed back where it belongs, in the hands of education consumers.

See you next week!
Richard McGrath

Monday 22 April 2013

Actress: Happy birthday mass murderer

Over the weekend leading actress Robyn Malcolm burst into tweet to wish, apparently without irony, a happy birthday to Lenin.

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Lenin, for those who don’t know, was the Bolshevik who snatched a good revolution away from the Russian people before going on to murder, starve and impoverish several million of the poor bastards, and set up the state apparatus which killed millions more.

I’m sure Robyn knows that.

I’m sure she knows what it was like living under communist rule.

Mind you, she could be just another dumb Barbie unaware of what their favourite mass murders got up to. Or she could just be trying to drum up controversy to help publicise the new play in which she stars, on a somewhat related subject.

Which worked.

Here’s a cartoon by Nick Kim to jog your memory about Berlin-Wall era communism:

Holidays_in_other_peoples_misery

“It’s not the drinking. It’s the way we’re mis-reporting the drinking”

"“We” have a major drinking problem, says the headline writers.

Bollocks, says economist Eric Crampton.* “They keep looking for dark linings to silver clouds, don't they?”

The actual results of the survey cited by the headline writers are the opposite of those reported, he summarises.

Why isn't the anti-alcohol lobby celebrating these results instead of saying how alarming they are? Do they somehow need for there to be a crisis?

Answers on a postcard, please.

* * * *

* I doubt the learned and refined Eric has ever said “Bollocks.” This is in fact my short summary of his position. Shoot me.

National’s programme is now dead. What next?

Cactus Kate  points out that after the weekend, the central plank of the government’s election platform has been taken away—because after the Winston First/Greens/Labour promise to renationalise Might River Power as soon as they get into power, no-one in their right mind will want to buy these shares. “The political risk is now entirely stupid.”

But now that they’ve scuppered the half-arsed privatisation, the axis of thieves should come clean, she says, and explain how they’re going to go about their other flagship promises, which at the moment are just vague and undefined.

1. Foreign ownership of farm land.  We know they are going to stop it so tell us how…
2. Foreign ownership of residential property. We know they are going to stop those evil Mainlanders from buying New Zealand homes, tell us how…
3. Exchange rate policy. We know they say the NZD is overvalued, so what are they going to do about it?  Print more money? How much? …
4. Regulating banking.  Profits, interest rates, LVR's. Capital gains on housing, land, land taxes etc...
5. Milk and cheese are out of the price range of many families.  Will they regulate the price of that?  How about vegetables? How about petrol and diesel and fast food?

They started with stuffing Mighty River Power. Now, by the logic of this and their subsequent pronouncements, they have a lot more to explain.

And our political journalists should be asking them for details.

The warmest since last time

While mainstream media have failed to broadcast the news that global temperatures have flatlined in the last 15 years, calling into question the models that say they should have risen catastrophically, Government Radio this morning was trumpeting a new worldwide study indicating “the end of last century produced the hottest temperatures for 14-hundred years.”

The study shows [says RNZ] that the rise in the average temperatures reverses more than a millennium of gradual cooling.

But does it really show that?

The chart above shows the study’s thirty-year mean relative temperatures for the last 2000 years, based on proxy measurements derived from the study of proxies like tree rings, coral and pollen. The important point for warmists is that the Medieval Warm Period (in which agriculture flourished in places like Greenland) has been made to disappear, and it’s mostly red at the end—which is what is leading to the headlines.

Unfortunately for the trumpeted conclusion, which is the only thing about the study mainstream media will want to talk about, many of the data series chosen for the study appear to have been either selected because they fit that conclusion (“if the selection is done on the proxies without de-trending ie the full proxy records over the 20th century, then records with strong trends will be selected and that will effectively force a hockey stick result” says an email between the authors), weighted to fit the chosen conclusion, or if their 20th century record fails to match the narrative, they’ve just been truncated.

More here at Climate Audit, in both post and comments.

DEBATE: Patents are enforceable property rights, yes or no?

Adam Mossoff and Jeffrey Tucker, two of the leading lights on opposite sides of the understanding of intellectual property rights, square off in print to make their case.

Patents are NOT enforceable property rights, says Tucker.

If patents for inventions were part of the free market, to make and sustain them would not require legislation, constitutions, bureaucracies, filings, armies of attorneys, and years of litigation. They would exist in the same way regular property rights exist.

Apparently Jeffrey has never noticed the laws, bureaucracies, filings and lawyers that underpin the title deeds to his house—or the years of litigation sometimes required to renovate it.  And despite invoking his name, he has failed to notice that Ludwig Von Mises was not an opponent of intellectual property*, and fails to understand (as Mossoff explains) “that property rights are not fundamentally justified as a solution to disputes over ‘scarce’ goods.”

To begin the moral justification for property rights from the economic concept of scarcity leaves unanswered the questions, “Why is producing values morally justified” and “Whence do values come?” Of course, property is a moral standard for resolving disputes, but this is only a logical corollary of the moral justification of property rights: The fruits of productive labour should be secured to their creators.

Mossoff also points out the mistake made by

[s]ome libertarians [who] assert that historically patents were statutory (monopoly) grants that were distinguished from “common law” court decisions that secured property rights in land, but this is myth masquerading as history (see here and here). We should reject it for the same reason we reject historical myths like the “robber barons,” because each uses a false account to bootstrap a normative argument. In fact, in the early American republic, courts secured patents as fundamental property rights: Judges created and applied to patents the same legal doctrines used to secure real estate, expansively protected patents, and provided constitutional protections to patents (see here, here and here).

They were right to do so.

At root, the justification for property rights is a justification for all types of property rights, such as farms, buildings, factories, oil and gas, radio spectrum, corporations, and inventions, among others. All “property” arises from the fact that one must produce the values required for a flourishing human life. (Here, “value” is not an economic concept, it is a moral concept, referring to those things a person produces to live a flourishing life.) Thus, the “right to property” defines the sphere of freedom necessary to create, use, and dispose of these values… [T]he genius and success of Anglo-American property law is that it recognized that property rights secure values, not physical objects. American courts have long recognized that “property ... may be violated without the physical taking of property” given any act that “destroys it or its value.” (In re Jacobs, 98 N.Y. 98, 105 (1885).) This is the meaning of the natural rights metaphor that property rights secure the fruits—i.e., the use and profits—of one’s labours.

With this understanding, it’s possible to understand his main point:

All property is fundamentally intellectual property, because the human mind is the ultimate root of the values we produce to live flourishing lives—and all of these values are justly secured as property rights to their creators… All property rights secure, in the words of [Ayn] Rand, “a man’s right to the product of his mind.”

That, in  nutshell, is the fundamental basis of all property, from  rights in water, chattels, land, spectrum, corporations and credit right through to rights in inventions and compositions.

* * * * *

* Mises points out that without copyright and patent protection, musicians, authors, and inventors are in the position of having to bear all the costs of production and invention while the benefits go to others.

Thursday 18 April 2013

ANZAC AFL [updated]

Anzac Day next week in Wellington represents a significant milestone in Australia-New Zealand sporting relations: the first time AFL teams play for points outside Australia.

The world’s most libertarian sport is “a fast paced, high scoring contact sport requiring a blend of speed, power, strength and skill, which will certainly appeal to all New Zealanders. It is the most watched sport on Australian television … it can be a difficult game to explain to those new to it, far better to show you!”

AFL is  best seen live, and this is every NZer’s chance.  Saint Kilda reckons they’ll have plenty of fans there, and there will be more than a few Sydney Swans fans—and one Canadian Swan, Mike Pyke, who once scored a try against the All Blacks.

His Swans’ teammate Adam Goodes has become a big fan of rugby, and the All Blacks.

"You grow to enjoy it - not so much the success of the All Blacks - but to have a team, with all the games they've played, and have a winning percentage of 80 per cent plus is ridiculous."

For more news and information about the 2013 ANZAC day game, which has a 5pm international curtain-raiser between the New Zealand Hawks and a South Pacific selection, click here.

For Ticketing information, click here.

And keep up on news with NZAFL on Twitter: https://twitter.com/AFLNZ

UPDATE: 19,500 seats sold, and record bookings for Wellington’s hotels.

With just four to go until the ANZAC Day game between St Kilda and Sydney at Westpac Stadium in Wellington AFLNZ CEO Rob Vanstam and AFLNZ Board Member and former New Zealand Falcon Tim Stevens were guests on Radio Sport with Murray Deaker yesterday. Deaker also speaks with AFL International Manager Tony Woods.

Links to the interview here:

Reality imitates art

After the bill was passed last night legalising gay marriage, this was posted at satire site The Civilian:

imageMarriage Destroyed Forever
The institution of marriage was destroyed forever this evening after Parliament voted overwhelmingly to make it more widely available and redefine it as a consensual, loving relationship between any two people.
    The Marriage (Definition of Marriage) Amendment Bill, written by Labour MP Louisa Wall, aimed to destroy marriage by making it more common and allowing it to be partaken in by two members of the same sex. It passed its third reading in the House of Representatives tonight by a vote of 77 to 44.
    Loud celebrations were heard in the public gallery and throughout the halls of Parliament as the final votes to destroy marriage were tallied… But while Parliament celebrated, many heterosexual New Zealanders across the country were upset to learn that their years-old nuptials had been utterly destroyed and made irrelevant.

Amusing, but not especially funny. Not at least until you read Lucyna Marie at the NZ Conservative blog, posting this not as satire but as genuine commentary:

Well, They’ve Done It!
Marriage no longer exists legally in New Zealand. We just have an un-dead corpse hanging around.

With commentary of that quality, you get some sense now why the vote for Lucyna’s position was so underwhelming.

And why social conservatives are increasingly irrelevant.

PS: Has your marriage been destroyed by the gays? Check on this convenient website: http://ismymarriagedeadyet.co.nz

Own your own Frank Lloyd Wright masterpiece

Own a Piece of Architectural History:

If you have a lazy US$4.5 million burning a hole in your portfolio (maybe you made some paper money shorting gold last week?), you could do worse than buy this Pasadena, California, textile block beauty built by Wright all the way back in 1923.

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La Miniatura, built in 1923 for Alice Millard, was the first of Wright's 'textile block' houses. Seeking a departure from the Prairie style for which he was best known, Wright created a series of homes from simple concrete blocks, patterned with motifs inspired by pre-Columbian ruins. Although critical response at the time was distinctly unkind, and concrete block construction never caught on quite the way the Prairie style did, time has vindicated Wright's creation: in 1980 the New York Times identified it as one of the best-known buildings in Los Angeles and a "classic work of the 20th century."
    The main house is a relatively modest 2,400 square feet, with 3 bedrooms, 3 bathrooms and a two-story living room spread out over three stories to take advantage of the hilly site. There's also a studio designed by Wright's son Lloyd. 90 years after it was built, the house still seems strangely modern, with its simple concrete and wood construction and connection to the outdoors. And all this can be yours — the Pasadena home is currently
for sale, for an asking price of $4.5 million (according to Canadian House and Home). I'm saving my pennies. 
    Interested? You can see the full listing from Crosby Doe Associates
here. 

021009lloydwrightfloorplans02.jpg

image

Additional photos, details and sketches of the Millard House available at the Millard House website.

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[Photos: Scott Mayoral, floor plans Frank Lloyd Foundation]

Wednesday 17 April 2013

Drink up, and be happy

image

Happiness is nowhere near as complex as you might have been led to believe.

For scientific research now confirms  merely a taste of beer can trigger a rush of chemical pleasure in the brain.

Proving again that beer didn’t just build our civilisation, it made it happy too.

Or as Benjamin Franklin was supposed to have said,

"Beer is proof that God loves us and wants us to be happy."

Cheers!  (Hic.)

Gold Sell-Off: There Is Only One Question That Matters

imageGuest post by Detlev Schlicter

Last Friday, I participated in a short debate on BBC Radio 4's Today program on the future direction of gold. Tom Kendall, global head of precious metals research at Credit Suisse, argued that gold was in trouble. I argued that it wasn't. So yours truly is on record on national radio the morning of gold's two worst trading days in 30 years arguing that it was still a good investment.

Is it?

I still think what I said on radio is correct. Even after two days of brutal bloodletting in the gold market and two days of soul-searching for the explanations, I believe the only questions that ultimately matter for the direction of gold are these:

Has the direction of global monetary policy changed fundamentally, or is it about to change fundamentally? Is the period of "quantitative easing" and super-low interest rates about to come to an end?

If the answer to these questions is yes, then gold will continue to be in trouble. If no, then it will come back.

Reasons to own gold
The reason I own gold and why I recommended it as an essential self-defence asset is not based on the chart pattern of the gold price, the opinion of Goldman Sachs, or the Indian wedding season. Rather, it's the diagnosis that the global fiat money economy has checkmated itself.

After 40 years of relentless paper money expansion, and in particular after 25 years of Fed-led global bubble finance, the dislocations in the global financial system are so massive that nobody in power dares turn off the monetary spigot.

Nor do they allow market forces to do their work. In other words, price credit and risk according to the available pool of real savings and the potential for real income generation, rather than according to the wishes of our master monetary central planners.

The reason why, for almost half a decade now, all the major central banks around the world have kept rates at zero and printed vast amounts of bank reserves is that the system is massively dislocated. Nobody wants the market to have a go at correcting this.

There are two potential outcomes (as I explain in my book):

  1. This policy is maintained and even intensified, which will ultimately lead to higher inflation and paper money collapse.
  2. This policy is abandoned and the liquidation of imbalances through market forces is allowed to unfold.

Gold is mainly a hedge against the first scenario, but it won't go to zero in the second scenario either. So far, I see little indication that central bankers are about to switch from the first scenario to the second, but we always have to consider the fact that the market is smarter than us and has its ears closer to the ground. What is the evidence?

Cyprus and Economic Monetary Union (EMU) of the European Union
Taken on their own, the events in Cyprus were not supportive of gold. Not because the island nation could potentially sell a smidgen of gold into the market, but rather because the EU masters decided to go for liquidation and deflation, rather than full-scale bailout and reflation. Cyprus' major bank is being liquidated. Not rescued and "recapitalized" as in the bad examples of RBS, Northern Rock, and Commerzbank. Or, in a more indirect and shameless way, reliquification in the case of Goldman Sachs, Morgan Stanley, Citibank, and numerous others.

The ECB's balance sheet has been shrinking over the past three months, not expanding. Depositors in EMU banks are being told that in future they shouldn't rely on unlimited money printing. Nor should they expect unlimited transfers from taxpayers in other countries to see the nominal value of their deposits protected. This is a strike for monetary sanity and a negative for gold. It should reduce the risk premium on paper money on the margin.

If this sets an example of how the global monetary bureaucracy is moving, then gold is indeed in trouble.

However, I don't see it.

As I argued before, it seems more likely to me that Japan is the role model for where other central banks will be heading: aggressive fiat money debasement, a last-gasp attempt at throwing the monetary kitchen sink at the economy.

Additionally, the EU bureaucracy may not be as principled on the question of hard or soft money when the patient brought in on a stretcher is not a European lightweight like Cyprus or even Greece. Imagine if one of the big boys, i.e., Spain, Italy, or France (the latter having been the EMU's big accident waiting to happen for some time), were in the same situation. Mr. Draghi's phone would immediately ring off the hook.

My sense is that even in Europe, the days of "quantitative easing" are not numbered by any stretch of the imagination.

Bernanke, the anti-Volcker
But the central bank that really matters is the Fed. Will we one day look back on the days of April 2013 as the moment an incredibly prescient gold market told us that Bernanke was getting isolated at the Fed? That people had begun to seriously tire of his academic stubbornness about the U.S government having the technology (a printing press) that allows it to print as many dollars as it wishes.

Of course, I don't know, but I somehow doubt it.

Yesterday was the worst day in the gold market since February 1983. Back then, gold was in a gigantic bear market. Not because of what Goldman thought or said, but because Paul Volcker was Fed chairman and had just applied a monetary root canal treatment to the U.S. economy, simply by stopping the printing presses. This allowed short rates to go up and restored faith in the paper dollar. Twenty percent return on T-bills? How's that for a signal that paper money won't be printed into oblivion!

The important thing was that Volcker (and some of his political masters) had the backbone to inflict this short-term pain to achieve long-term (although, sadly, not lasting) stability and to live with the consequences of the tightening.
Today, the consequences would be much more severe, and there is also much less central banker backbone on display. Over the past two decades, the central banker has, instead, become the leveraged trader's best friend. Volcker was made of sterner stuff.

If the gold market knows that easy money is about to end, how come the other markets haven't gotten the news yet?

Do we really believe that stocks would be trading at or near all-time highs, the bonds of fiscally challenged nations and of small-fry corporations trading at record-low yields, if the end of easy money were around the corner?

To justify the lofty valuations of these markets on fundamentals, one would have to assume that they no longer benefit from cheap money. Instead, they'll again have to become the efficient-market hypothesis' disinterested, objective, reliable, and forward-looking barometers of our economic future. A bright future, indeed. One in which, apparently, all our problems -- cyclical, structural, fiscal, and demographic -- have now been solved so that the central bankers can pack up the emergency tool kit and gold can be sent to the museum.

Well, good luck with that.

The sucker trade
In the debate last Friday, my "opponent," Tom Kendall, made a very good point. Tom said that what causes problems for gold is the "direction of travel" of the economy and other asset markets. It is a bit of a strange phrase, but the way I understood it, it is quite fitting: Equities are trading higher (in my view mainly because of easy money and the correct expectation that easy money will stay with us), while bonds are stable, and inflation (so far) is not a problem.
In this environment, the gold allocation in a portfolio feels like a dead weight. For most investors, it is difficult to stand on the sidelines of a rallying equity market. They need to be part of it.

I think that what is happening here is that Bernanke & Co. are enjoying, for the moment, a monetary policy sweet spot at which their monetary machinations boost equities sufficiently to suck in more and more players from the sidelines. Yet they do not affect the major inflation readings, nor do they upset the bond market. This policy is not bringing the financial system back into balance. It does not reduce imbalances nor dissolve economic dislocations. To the contrary, this policy is marginally adding to long-term problems. But it feels good for now.

Bernanke is blowing new bubbles, and as we have seen in the past, it is in the early inflation phases of new bubbles that gold struggles. Equity investors are getting sucked in again, and the gold bugs may have to wait until they get spat out and the Fed's cavalry again rides to their rescue before gold comes back.

In any case, I remain certain of one thing:
This will end badly.

Sincerely,
Detlev Schlichter

Detlev Schlichter is a writer and Austrian School economist who has spent nearly twenty years working in international finance, including for Merrill Lynch, J.P. Morgan, and Wester Asset Management.
His book
Paper Money Collapse argues the present crisis is the unavoidable result of elastic money; and that the continuous money production to stimulate the economy could lead to a complete collapse of the monetary system.

A version of this article appeared at the Laissez Faire Book Club.