Friday, January 13, 2006

The Fiction of Government Employees Paying Tax

It seems John Prescott, our larger-than-life Deputy Prime Minister, is once again in hot water for not paying the very taxes he is paid to administrate. But aside from his embarrassment, this story once again highlights the general fiction that people on public handouts (i.e. government employees, government pensioners, government welfare recipients) pay any tax at all.

Check out this quote from Uncle Murray:
It might be objected that, after all, a politician who urges higher taxes is not only imposing suffering on other people; he himself as a taxpayer will also have to bear the same deprivations as other citizens. Isn't there, then, a kind of nobility, even if misguided, in his plea for "belt-tightening" common sacrifice? To meet this question, we must realize a vital truth that has long remained discreetly veiled to the tax-burdened citizenry. And that is: contrary to carefully instilled myth, politicians and bureaucrats pay no taxes. Take, for example, a politician who receives a salary of, say, $80,000; assume he duly files his income tax return, and pays $20,000. We must realize that he does not in reality pay $20,000 in taxes; instead, he is simply a net tax-receiver of $60,000. The notion that he pays taxes is simply an accounting fiction, designed to bamboozle the citizenry into believing that he and the rest of us are on the same moral and financial footing before the law. He pays nothing; he simply is extracting $60,000 per annum from our pockets.
Check out the original article:

Babbitry And Taxes: A Profile in Courage?

Ask yourself the following question, particularly if you are a public servant, with no outside private income, who currently believes they pay taxes:

If for some reason we woke up in a world tomorrow where all taxes had been abolished, what would the wages be of the typical public servant?
Most people in the private sector would see their wages rise. Some in the private sector, close to the chaos of working on government contracts, might see their wages fall. Everyone in the public sector, who earned no outside private income, would see their wages drop to zero, except perhaps for a small amount of inflationary counterfeit cash printed up el rapido, on the Bank of England printing presses, thereby making clear the immediate need for the introduction of a 100% gold reserve banking standard to prevent this continuing government counterfeiting money supply fraud.

Let's just say this again, one more time. Government workers, pensioners, and welfare recipients pay no taxes. Don't ever let government payroll accountancy sleights-of-hand fool you otherwise. So why do they go through the bother of doing this? Wouldn't it cheaper all round if no politicians or public servants had to pay tax?

Yes, it would be a lot cheaper if everyone on the government payroll was simply excluded from the taxation process. But how far would a politician get if he stood up and told the rest of us that our taxes had to go up, again? Simon Hughes, the socialist muppet who is about to destroy the last vestiges of liberalism in the old Liberal Party, would look pretty much a fool coming out with cant such as the following:
"I hold to [a 50 per cent tax rate on earnings over £100,000]. We must have a progressive and fair tax system"
In a less opaque system, where it was clear that Simon Hughes paid not a brass banana in tax, Simon Hughes would be lynched for such a crass attempt to steal other people's money. As it is, with the government tax sleight-of-hand in place, he looks like a self-sacrificing hero; thank the Lord for the wisdom of Uncle Murray in making this clear.

So it's nice that my tax bill has just gone up again, to pay Prescott's wages, so he can pay his tax to pay another government official. It has a nice kind of merry-go-round feel to it, doesn't it? It's nice. But it is fictional that he has had to pay anything. It's still me holding the candle, baby. It always is.

27 comments:

David Farrer said...

Excellent site, Jack. I've blogged along these lines a few times and have added you to my blogroll.

Jack Maturin said...

Excellent. Freedom and Whisky shall appear here, before you can say "John's just John".

Julius Blumfeld said...

"thereby making clear the immediate need for the introduction of a 100% gold reserve banking standard to prevent this continuing government counterfeiting money supply fraud."

A State-mandated gold standard may be better than fiat money, but why have any mandatory "standard"? Just leave money to the market. Gold might win, but then again it might not. Who knows.

Jack Maturin said...

Ah, do I detect the influence of David Friedman? :-)

You'll notice I never used any term such as state-mandated, or mandatory, as you have done. (Occasionally by accident I may do so, or imply it, but I'll apologise if you ever spot me doing it.)

I think the only reason fractional reserve banking was ever allowed, was because of the state. For millenia a 100% gold reserve standard was the rule. Various exceptions, such as the inflation of the Roman monies, only proved the rule that a 100% gold reserve standard was essential.

If 'gold' is money (ok, you can have silver too, but I think gold will win out), then if I leave 100 oz of gold with you, my banker, and you give me a 100 oz certificate (a 100 oz 'note') I do not expect you to print up any more notes and lend them out too, on the basis of my gold. When this started happening in the middle ages (I think in Venice and Florence, if memory serves), there occurred the first ever 'runs' on banks. Essentially the bank managers had committed fraud, and I stood a good chance of losing my gold if I didn't run to the bank fast enough. And the system always returned to a 100% gold reserve standard, after such fraudulent episodes, until one day a state mandated judge, I've forgotten where, ruled that it was Ok for the banker to do this, probably because this either served the judge personally, or the state he represented. And then the floodgates opened. It was fractional reserve all the way, baby, until we ended up today, where my original five pounds of English silver, will now just about get me a pair of socks from M and S.

Under natural law, if you, as a banker, print up extra notes on my money, you are allowing others to come to your bank and claim my gold. You are therefore committing theft (or at least fraud). It is only state-support for this theft, which allows fractional reserves. Therefore a 100% gold reserve standard is the only ethical monetary standard (for gold), and the only basis for legality (under a natural law system).

Yes, we could have silver. Or platinum, or cocoa beans, or cigarettes, but in all these cases it is only a 100% reserve which is ethical, therefore legal.

Money is only an exchange mechanism, so essentially it doesn't matter what it is (as long as it is always a 100% reserve). However, I suspect that gold will win out.

It is fungible, portable, doesn't oxidise, and has a relatively small mass against the amount of goods it can buy (e.g. 1 oz of gold gets you a decent toga in ancient Rome, and gets you a decent suit in modern Britain).

On a purely utilitarian point, the other reason we should have a 100% standard is because this is the only standard which prevents inflation and deflation. But rather than providing you with another impenentrable swathe on this, I'll just point you to Uncle Murray on this, who makes the point far clearer than I ever could:

The Case for the 100 Percent Gold Dollar

And now, to Match of the Day.

Anonymous said...

Julius may well be influenced by David Friedman - indeed he probably is - but there are many Austrian economists who offer alternatives to 100% reserve gold banking. In particular you may wish to check out the work of Kevin Dowd of Nottingham University Business School. His book 'Laissez Faire Banking' explains how a secure, non-fraudulent fractional reserve system can arise on the purely free market and why this is superior to 100% gold. I am sympathetic to Dowd's view but think that his system would only work really securely in a totally anarcho-libertarian world. Any hint of a state would undermine the psychological assumptions on which the system rests. So long as we have a state the best monetary solution is 100% gold.

You may also be interested in Roderick Long's more philosophical views on why anarcho-libertarianism does not necesarily require 100% gold, which are available to view on his website. This issue is one of great controversy even within Austrianism. Rothbard's is just one Austrian view. Also 'natural law' is not an Austrian position. Rothbard belived in natural law but this was in addition to his Austrianism. Most Austrians do not subscribe to the idea and Mises thought it was poppycock.

Jack Maturin said...

Would you mind summarising Kevin Dowd's ideas, or providing a link to such a summary, to give me and possibly other AngloAustrian readers a chance to see these ideas without necessarily having to purchase a book? I've dabbled in Crooked Timber, on an occasional sad and trying basis, and their usual way out of most debates I've been involved with is to throw some obscure book at you, without summarising its ideas or providing a link to such a summary:

"We have defeated you because we have a book which holds the ideas which defeat you, but we're not going to tell you what they are."

Very frustrating.

To challenge or refute Crooked Timberans appeared to involve spending about £200 pounds a month on books mainly written by other Crooked Timberans. No doubt they can afford to do so on their university incomes supported on my wallet (at least the English ones).

To avoid you throwing black mud at my black kettle, if in the future I ever endeavour to inadvertently adopt such a tactic, please let me know, and I will either summarise the idea in question, or find a decent link. Or apologise for my hypocrisy.

I want AngloAustria to be a "book-purchase-necessary-to-keep-up" free zone.

So long as we have a state the best monetary solution is 100% gold

With the proviso of not having Mr Dowd's ideas to hand, like Rothbard, I am puzzled why there is this enormous reticence to let go of fractional reserve banking?

What good has it ever done those of us outside of the legal counterfeiters in the government or the banking industry?

Whatever medium of exchange we use, it doesn't matter what it is, or how much of it there is, provided it fulfills all the usual provisos of being fungible (rules out diamonds), portable (rules out cement), divisible into portions easily exchangeable for other goods (possibly rules out platinum, as being too valuable to coin), long-lasting over time (rules out buck skins, tobacco and cocoa pods), accepted in its own right as a good (e.g. for jewellry), etc, etc. So why this crushing need for fractionation?

Again, with the proviso of not knowing Mr Dowd's ideas, assuming that no counterfeiting or fraud is used in his system, and assuming that even Uncle Murray could find no legal or ethical fault with it, round my way, when/if the state has disappeared, I'll only be dealing with 100% non-fraction monetary systems, probably based on gold or silver, and most likely gold. I'm not a betting man, but I reckon that's what most people will be doing, too.

Though if you and the other Dowdians want to contractually exchange amongst each other, in a different but ethically acceptable way, who would I be to impose my will upon you? But if you want to buy goods from 'Maturin-Drax Industries', it'll be gold cash on the nail please. Our corporation motto will be 'We accept no cash substitutes and we define cash as gold'.

Mises thought it was poppycock

Mises also thought anarchism was poppycock, and democracy a good idea, which I think is poppycock. Now, obviously, there is a lot of debate about what he defined as anarchism, and what he defined as democracy, but just because Mises stated something does not make it holy writ in the land of AngloAustria.

We'll have no Randroid-style ideological slavishness in these territories, so even though I personally consider Uncle Murray an ideological giant, in comparison to me like a Lord of the Rings Numerorean Anduin river statue, with me as a paddling dwarf, I disagree with him on copyright, and hold more of a Kinesellan position.

I'm sure there are things I also disagree with Professor Hoppe about too (though nothing comes immediately to mind). It should prove interesting to see what Professor Block comes out with about Hoppeian time preferences. I admire Professor Block greatly. I'm going to have a fun time deciding which of these two I agree with, on time preferences.

You never know. One day I may even reach my own unique position, and then make a pilgrimage to Auburn to propose it; some people dream about Britney Spears, I dream about making a speech in Auburn! I really do need to get out more! :-)

Anonymous said...

Jack, I was merely suggesting some additional reading in the Austrian tradition not trying to defeat your argument which I agree with. 100% reserve gold banking is not a central tenet of Austrianism and neither is natural law. Your blog is called 'AngloAustria' but there is much more to Austrianism than the Rothbardian interpretation. If you look up Dowd's book on Amazon you will get the summary and if you click on 'look inside the book' you can read the book for free. The essentials of his argument are in the intro pages.

You write that:

'I'm sure there are things I also disagree with Professor Hoppe about too (though nothing comes immediately to mind).'

How do you feel about the 'physical removal' of homosexuals from society in order to maintain a libertarian order?

Jack Maturin said...

The right to exclusion is inherent in private property laws. If I own a piece of property, I should be able to exclude from it whoever I want, including homosexuals, or heterosexuals, or asexuals, or bisexuals, or whoever I want really. If I only want six-foot albinos living on my land, I should be able to exclude all non-six-foot non-albinos.

Hoppe thinks a stateless libertarian society will only be able to survive intact if it is based on the family, a view with which I agree. So if the owners of the land upon which a libertarian community has been created decide to all have a covenant which promotes the family, and decide to have a covenant which everyone must agree to before being allowed to rent occupation space on that land, which grants the owners the right to exclude self-declared homosexuals (and democrats, and socialists, and eco-mentalists), then I see no problem there. The homosexuals, and the rest, could go and find their own property to live on.

If I, and a few others, decided to set up a community based upon the faith of following Manchester United, and created a similar covenant excluding those who supported either Liverpool or Everton, then the land owners of this community would be within their rights to exclude self-declared Everton or Liverpool supporters (and vice versa), who broke this covenant.

I'm not sure where this would place Wayne Rooney, but I'm sure we could squeeze him into a third community located in Cheshire, based upon the faith of buying hugely expensive cars. We could call this community, 'Wilmslow Edge', and the covenant would be that anyone buying a car for less than £100,000 pounds, would be excluded from this society. It would be fair enough, so long as anyone allowed to move into the area agreed with the covenant beforehand.

Personally, I'm a secessionist, so I'm happy for 100 people to acquire a piece of land, and live on it as a homosexual democratic commune, if that's what they want to do. What they do to themselves is up to them. So long as they didn't start aggressing against my property, or the Hoppeian family-based enclave on which I lived, I would even be happy to trade with them and be happy to co-exist with them in the same world. Each to his own.

If a hundred catholic monks want to set up a monastic commune on their own land, once again, what's it got to do with me? It's their land. They can do what they like on it. And if they want to exclude non-catholics, that's entirely up to them.

I'm even hoping there'll be some large forests where all the eco-mentalists can go, to return to the stone age in sparse hunter-gatherer tribes. As long as keep out of my hair, and don't try to force me to live their Malthusian lifestyle, good luck to them. Most of them will die, of course, without the benefits of capitalism, but that would be their problem. Once they were all dead, from self-induced stupidity, we could then homestead their abandoned land and create family-covenant communities upon them, to grow and spread Hoppe World.

However, I agree with Hoppe that if one did live in a territory in which promoters of democracy were tolerated, they would quickly agitate a situation to create democracy again, and drag the territory back down into the swamp of democracy, sexual perversion, vandalism, graft, welfare, rent-seeking, brutal sadistic violent crime, warfare, and general statist decivilisation, that we would somehow have escaped from in the first place.

So assuming, overnight, the Archangel Gabriel came down and took away all the supporters of the state, and spirited them away to another place, away from us, I would move immediately into the bosom of a Hoppeian-lifestyle territory, with a few land owners holding to a series of family-based covenants excluding all those lifestyles felt by these family elders to be incompatible with a family-based order. I think I would be happy here, or at least a lot happier than the decivilised land of gang-raping happy-slapping psychotically challenged binge-drinking modern socialist Britain.

Let's hope that one day we can reach this secessionist stateless world. You exclude the people you don't like from your land. I'll exclude the people I don't like from my land. We'll all be happy.

Anonymous said...

The idea that different communities can set rules for the occupation of their own land is an obvious and uncontroversial implication of libertarianism. Nozick made this very clear and explicit in his 'Anarchy, State and Utopia' 1973.

The trouble is that Hoppe seems to identify the kincentred enclave of Hoppeville specifically as 'libertarianism' and 'society'. If this is so then the potency and relevance of libertarianism as a solution to actual social problems is obviated and instead becomes a discussion merely about the rules of habitation for some Bophuthatswana 'gated community' of religious, family centred, homophobes.

That families contribute much to social stability is also a fairly obvious sociological insight, but if 'libertarianism' really is absolutely dependent on this extremely narrow and authoritarian view of family life then it is a very delicate and fragile flower indeed. The rest of the world may look in on it and admire it but they will find it useless as a philosophy and a social model.

Asdide from this, perhaps you could elaborate on the ways in which tolerating homosexuals leads to:

democracy, sexual perversion, vandalism, graft, welfare, rent-seeking, brutal sadistic violent crime, warfare, and general statist decivilisation, gang-raping, happy-slapping and psychotically challenged binge-drinking.

The connection is not clear to me but obviously you and Professor Hoppe are concerned.

Jack Maturin said...

Let's just requote in full what I said, in the section you refer to:

However, I agree with Hoppe that if one did live in a territory in which promoters of democracy were tolerated, they would quickly agitate a situation to create democracy again, and drag the territory back down into the swamp of democracy, sexual perversion, vandalism, graft, welfare, rent-seeking, brutal sadistic violent crime, warfare, and general statist decivilisation, that we would somehow have escaped from in the first place.

Hmmm. Any mention of homosexual tolerance leading to this woeful list? Or indeed any mention of homosexuality at all? Or did I instead refer to 'promoters of democracy' as being the problem? It is democracy that is the causative problem and the high time preference democratic human zoo that it causally creates, which leads us away from family-based living.

That you have chosen to reverse and garble this thrust, I suppose to try to discredit me in some way, tells me all I need to know about your tedious motives in commenting on this blog.

You may find what I have to say dull, too. Great. Go and bug someone else then. I do promise you it won't upset me.

Alternatively, you could try to explain to me how a mass homosexual Admiral Duncan 'glad to be gay' lifestyle is helpful in maintaining cohesion in a private community based on traditional family values? That would be a Gordian knot I would love to see unravelled.

No doubt a deeply religous and devout private catholic community would in the same way benefit from the presence of a noisy clutch of militant atheists, to temper their catholic zeal.

Professor Hoppe and I may be wrong in thinking that it will take a family-based anti-democratic attitude to maintain the long-term existence of a libertarian territory. But we'll be wrong living on our fragile flower island, 'Hoppe Bay', and you can be right living where you live in rock-solid 'Liberty Shores', the next private island along in the chain.

But I think I'll still take my chances in Hoppe Bay. My bets are that those of you living in Liberty Shores will quickly descend into democratic chaos, and you'll be right back to where you started, with a burgeoning warfare-welfare state.

If you disagree, no doubt you will welcome the occasional boat from Hoppe Bay with open arms when we dump our undesirables on you; you'll be strong enough to take it, I'm sure.

Let the Gods of the great secessional experiment decide.

Anonymous said...

You seem to take offense very quickly Jack. Your emotional grip is almost as fragile as your understanding of libertarianism and Austrian economics.

All I have done is press you for clarity on some points and you become abusive and defensive - most odd. I'll let your readers draw their own conclusions about that.

I was only wondering what the reason was that all homosexuals must be expelled from 'society' to use Hoppe's word. Either they are the cause of terrible social strife and must be expelled for social safety or they are harmless, as you seem to concede, and the urgency for their expulsion becomes an even greater mystery. Perhaps a heavily armed Matthew Parris will simply go berserk and loose off a few machine gun rounds into a bus queue one day - who can tell?

I couldn't begin to explain how "a mass homosexual Admiral Duncan 'glad to be gay' lifestyle is helpful in maintaining cohesion in a private community based on traditional family values?" but then a private community based on family values is not the same thing as 'society' though is it?

It is also most odd that you should choose to mention the 'Admial Duncan' since the only notable non-libertarian activity that has ever famously taken place there was when the innocent homosexuals and their straight friends, including a pregnant woman, were blown up by a bomb planted by a more 'traditional values' kind of a guy.

As for promoters of democracy, communism, nature worship etc. etc. well these are certainly powerful ideologies and they need a strong and coherent intellectual challenge in order to defeat them. Unfortunately the best that you and Hoppe can manage is 'run to the hills and hide'. Brilliant! The victory for liberty cannot be long coming now.

Julius Blumfeld said...

"Under natural law, if you, as a banker, print up extra notes on my money, you are allowing others to come to your bank and claim my gold. You are therefore committing theft (or at least fraud). It is only state-support for this theft, which allows fractional reserves."

1. It would be a trivial matter for a bank which wished to practice FRB in a free market to set out its terms of business, including the fact that it practices FRB and the attendant risks to the customer. Customers would then be free to make "deposits" to the bank, or not, as they wished. Many might do so on the basis that the increased risk is counterbalanced by an increased rate of interest on their "deposit". Where would be the fraud in this and why should a libertarian object to it?

2. You say it is only state support that enables FRB. Maybe so, maybe not; but this is no argument for banning the practice in a free market if the participants to it are freely consenting (as to which, see 1. above). If FRB does not occur on a free market then these is no need to ban it; and if it does then ex hypothesi it meets a need.

Julius

Julius Blumfeld said...

"but then a private community based on family values is not the same thing as 'society' though is it?"

The question is whether Hoppe's notorious remarks were directed at the uncontroversial right of private property owners to decide who lives on their property, or whether he was making a wider point that certain classes of persons must be expelled from "society", meaning (in effect) everywhere or at least everywhere proximate to libertarians. The latter would entail the inhabitants of Hoppe Bay not merely determining who lives in Hoppe Bay but also determining who lives in Libery Shore. This would of course be grossly unlibertarian and indeed smacks of nazism in certain respects.

It seems to me that it is self-evident that Hoppe meant the latter. Why should he wish to make a trivial point about the right of property owners to control their own land? And why otherwise refer to "society"? And why "expel"? The question of expulsion could hardly arise if he meant merely the right of property owners to determine who is allowed to live on their property in the first place! (crypto-gays lying about their preferences on the gated community application form?!)

In this connnection it is perhaps of interest that whilst many others have defended Hoppe on the ground that he was merely making the uncontroversial narrow point, he himself has not defended the passage or clarified his position on this basis. Why, I wonder?

No, the real point Hoppe is making (and it would be better if he were to articulate it clearly rather than hide behind the "he was only talking about private property rights" defence that others have constructed for him) is that he thinks that libertarian ideology can only spread and be sustained by a world in which culturally conservative "family" values prevail. Therefore, he thinks, steps must be taken to ensure that those values are not polluted, including the physical expulsion of polluters to some far-away place (and if they won't go, presumably they would have to be killed or incarcerated), irrespective of such niceties as property and allied rights.

Is he right? (putting to one side for the horrors that such expulsions would entail and whether a libertarianism that requires such steps is even worth having). I don't think so. There is probably a weak correlation between respect for property rights and "traditional" family values, but it is only a weak one and hardly forms a compelling basis for a libertarian strategy. It is commonplace that the conservative Right in the United States has been enthusiastic about the use of State power when it suits them. The LewRockwell type culturally conservative anarchists are hardly representative of the politics of mainstream family value type conservatives, whether in the U.S. or here in the U.K.

As for the particular case of gays, the idea that they pose any threat to family values is surely absurd. The partial disintegration of the family in modern society has many causes, but by far and away the greatest cause is undoubtedly welfare and its attendant distortions and perverse incentives. The increasing visibilty of gays has nothing to do with it. And anyway, what is anti-family about being gay?

I would add that Hoppe has written plenty of decent stuff as well. But on this issue, I think he is bonkers and an embarassment.

Jack Maturin said...

Your emotional grip is almost as fragile as your understanding of libertarianism and Austrian economics.

Oh sticks and stones may break my bones, anonymous. I may be a quivering jellyfish, but at least I try to have the decency to quote you back to yourself accurately, something you seem to be incapable of.

Perhaps a heavily armed Matthew Parris will simply go berserk and loose off a few machine gun rounds into a bus queue one day - who can tell?

I've got to give you credit there, for a nice line. But it's not bullets that we need to be afraid of, is it? It's ideas. And Matthew Parris would potentially be far more dangerous, on this basis, than a whole squadron of SAS men, just as Lenin was far more dangerous than the entire Russian army, and Marx was more dangerous than the entire armed forces of the British empire.

The pen is mightier than the sword. And Matthew Parris's pen is very mighty indeed.

I couldn't begin to explain how "a mass homosexual Admiral Duncan 'glad to be gay' lifestyle is helpful in maintaining cohesion in a private community based on traditional family values?"

Well for someone so obviously intelligent, anonymous, I'm very surprised that you feel incapable of answering a question at the root of the reason why Hoppe wishes to exclude homosexuals from his community/society/enclave/gulch. I thought someone of your calibre would have had the answers to everything.

...but then a private community based on family values is not the same thing as 'society' though is it?

Oh dear. You're not suffering from anthropomorphism are you, anonymous? Or are you just dancing on the head of a semantic pin?

It is also most odd that you should choose to mention the 'Admial Duncan'

When I'm in town I'm often down Old Compton Street, looking for a bit of jazz. I'm sure you know it well yourself. If ever you want a mental image of the 'glad to be gay' lifestyle, I recommend standing outside Admiral Duncan's hostelry on a summer evening around 9pm, if you can get to within 50 feet of the front door. I'll be the one wearing the Mises T-shirt.

...they need a strong and coherent intellectual challenge in order to defeat them.

Well, it would be nice if you offered up a coherent position, rather than just attacking mine, or gave us a blog site address, or told us a unique name, fictional or otherwise, so we could get a handle on where you come from, so we could understand your brilliance better. As you're obviously the potential saviour of the planet, it's very hard for we mortals to know what to do if you won't tell us where we can discover more of your wisdom.

It's always very easy, I find to criticise and hector, while hiding behind the anonymous tag.

Come out so we can see you. I've provided you with a nice big target to aim your poisonous arrows at. Why don't you show me yours?

...were blown up by a bomb planted by a more 'traditional values' kind of a guy.

It's sad really, that you feel you need to descend to this level of smearing. Someone with such strong arguments as yourself shouldn't really need to go this low, should you? Couldn't you just dazzle me with your theoretical brilliance instead?

The victory for liberty cannot be long coming now.

No doubt you have a created a better and more rigourous theoretical basis for action than Hoppe, with his Theory of Socialism and Capitalism.

Please let me know where it is, so I can enlighten myself with it, and then help you on an alternative road to victory.

Why Professor Hoppe is an internationally renowned promoter of Austrianism, who we've all heard of, and why you are so unknown, is a complete mystery.

Unless, of course, you're not unknown? Please enlighten me.

Anonymous said...

To answer Julius's point above, the fraud arises when people declare or borrow against their assets. Deposits held in fractional reserve cannot legitimately count as a full title asset. This problem also can be overcome by free contract but it is not so simply done and will to some degree offset the benefits to be had in extra interest.

Julius is right that no bans are needed in a free market since the market will sort itself out but under statism, even minimal statism, there will be a temptation for banks to over extend their lending relative to their deposits in the expectation of bailout from the state even if there is no central bank. This is a point I have raised with Dowd, who otherwise argues as Julius does, and he conceeded that banking rectitude under FRB was only really secure where there was no psychological hope of state bailout whatsoever. Wisely he took this as an argument in favour of anarchism.

Personally I think that FRB is too unstable to risk in anything other than a stongly libertarian society (even one including those pesky and dangerous homosexuals).

Anonymous said...

Jack, you write that:

'Matthew Parris would potentially be far more dangerous, on this basis, than a whole squadron of SAS men, just as Lenin was far more dangerous than the entire Russian army, and Marx was more dangerous than the entire armed forces of the British empire.'

What does this have to do with Parris's homosexuality?

If, as you say, you like going to Old Compton Street and hanging around gay bars and the more bohemian areas of London are you prepared to give all this up in Hoppe Bay. None of this will be tolerated in Hoppe Bay. Indeed there won't anything very much at all in the way of entertainment, theatre, fashion or art once all the homosexuals have been expelled. Well fine, Hoppe can put up a fence around his garden and call it 'society' if he wants and I'm sure you will be welcome to live with him there but the rest of the world, those of us living outside of 'society', beyond the true 'libertarian' pale will have to sort out our own problems without the great man's help. I'm sure we can arrange for you to have a day release pass when you get tired of all that hymn singing and deferring to Popes and Kings and Knights and Overlords in the 'natural order' and instead want to hang out in jazz clubs and gay bars.

Jack Maturin said...

Just tell us who you are, anonymous; fictional names are fine. A web site you hang out on would be nice too.

Otherwise, stop wasting my time.

Jack Maturin said...

Ah, Julius, you've made the crucial distinction right there between savings and loan funds, or what Mises called claims transactions and credit transactions.

Claims transactions are money. That is you deposit 100 oz of gold in the bank, and receive a claims transaction note back for 100 oz of gold. At any time you, or anyone else, can go to the bank and pick up 100 oz of gold.

Credit transactions are not money. For 100 oz of gold you purchase a contract note, or bond, which stipulates the rate of interest, and which promises to pay you back a certain amount of gold at a certain time in the future.

If we get rid of the bank, which is clouding the picture, you could do the same with a factory owner. You give him your 100 oz, which then becomes his 100 oz, and in return he promises to pay you back 110 oz of gold, in one year's time. He has purchased your money, with an exchanged contractual promise, or company bond. He then spends his 100 oz of gold on various factory items and labour, and if you and he are both lucky, at the end of one year his entrepreneurship has made enough money to pay you back your original investment, plus agreed interest, for which you exchange the original bond.

There is absolutely no objection to your buying similar bonds from the bank, let's say for 100 oz of your gold, in the speculative hope that at the end of the year these contracts will give you back 110 oz (or 200 oz, or whatever). If they told you up front the fractional basis on which they were going to do this, then that would be fair enough.

I believe such pyramid schemes are legal, even under the modern state. Perhaps less than wise to enter into, but still legal. Fractional Reserve Banking is simply a financial pyramid scheme writ large.

And if you turned up with your bond, the following year, and they reported there was no gold left in the bond coffer, that would be your problem and not anybody else's. But you wouldn't have been depositing savings. You would have been exchanging your money for a credit promise. As soon as you signed the contract, your money would belong to them, to do with as they wished. You would have a contractual promise in your hand, subject to all of the risks of the bond loan market, and perhaps future court clashes, but it would not be money, in the same way that shares in companies are not money.

And don't come to MaturinDrax industries to try to buy anything with that risky bond. We only accept cash. And we define cash as gold or, seeing as it's you, claims transaction notes for gold, from reliable banks. No credit transaction notes are acceptable.

I've probably explained all that really badly. No doubt 'anonymous', when they unmask themselves, will give you a better explanation on their blog site.

But if you check out this article (search for "To advocate the complete" and read the whole article this phrase starts), then Uncle Murray will explain it much better than me.

When banks in Italy started passing off credit transactions as claims transactions, they were quickly rumbled and quickly brought back into line.

I can't recall the exact incident, though I'll try to find it and make a post on it, but at one point a state judge decided to accept credit transactions as claims transactions, and forbade anyone from suing their bank for doing this. The banks then gained the legal right to counterfeit.

And from then on money was sunk. But now we're going round in circles. I'll try to find a link to this fudge, which has given us all of the subsequent problems and do a post on it.

Anonymous said...

I think Jack's explanation above is very clear. Though I would strongly recommend that everyone read Mises Institute Fellow Roderick Long's comments on FRB on his blog. The website is here:

http://praxeology.net/unblog.htm

scroll down to the entry 'Platonic Bailments'. I don't agree with his defence of FRB but it is certainly ingenious.

Jack,

I am not teasing you. I just wanted to test to what degree you agree with Hoppe. I do not have a website and do not usually comment much on blogs nor do I have a nom de plume. I prefer not to use my real name as I have very close links with many at the Mises Institute and other places and, given some of the personal rancour that exists between various libertarian factions, I prefer not to get publically involved in intra-libertarian disputes.

Jack Maturin said...

It seems to me that it is self-evident that Hoppe meant the latter.

Well, Julius, if he did then I would have to withdraw my support from his position. I'm a secessionist. If we ever do get to what we'll call, for the sake of argument, a 'libertarian world', I think it's going to consist of thousands of small territories (such as Singapore, Lichtenstein, Hoppe Bay, and Liberty Shores), each with their own 'society'. These societies would trade with each other, and presumably individuals would travel to different territories, for purposes of business and pleasure, but I'm with you in believing that if we can secede down to the level of the individual, where our home is our castle, then we have no right inflicting our views on others.

If all the jazz bars, in our mythical archipelago, were on the homosexual island 'Piano Paradise', where you had to be gay to be a permanent resident, I personally, as long as they were happy to see me for such jaunts, would have to make regular boat journeys over there, for a bit of whisky and double bass; this may of course, debar me from returning to Hoppe Bay, if the residency restrictions were strict enough. But if that were to be the case, then so be it. There would always be Liberty Shores, where anyone can go! :-)

I'm confident there will still also remain a few states, particularly in the early decades of a few libertarian territories, with which we'll have to co-exist as best we can. If we get it right though, I think the populations of these states would quickly throw off their governments and join us in our secessionary cavalcade.

As for the particular case of gays, the idea that they pose any threat to family values is surely absurd.

Well, not absurd, not absolutely absurd. With higher time preferences, due to a lesser desire to have children, as exemplified by Keynes's statement that in the long run we are all dead, there is a risk that a particular society would become more unstable if enough such high-preference individuals existed within it. And as it is natural for people to promote their own lifestyles, as I do with mine, this destabilisation could spread and then come to undermine the particular society.

You could say the same about just one pet communist being allowed. What risk would they pose? It would be a small one, but if unchecked it would grow.

One Matthew Parris on the island seems innocuous. But he's a great man, full of intellgence and wit. He would be admired by the 'young folk', his lifestyle would become public, and then tolerated, and then young men would come to emulate him. And unless he chose to be celibate, as Stephen Fry tried for a while, he would need to find a sexual partner, and so now there are two homosexuals. So do we have Parris's lover banished from the island, but leave Parris alone (if he would stay)? We could choose to exclude both, or let them both stay, and if we let them stay the behaviour is more likely to spread. And then they split up, because childless individuals are much more likely to split up than couples with children, and so on it goes.

And if you fear that this behaviour is likely to destablise your family-based community, to the point where it may collapse, it is not Matthew Parris that you need to worry about, as an individual, it is the tendency that if you allow him to continue living on your property, without setting up the exclusionary covenant beforehand, his way of life is likely to spread; particularly if he is seen as being 'successful', as I'm sure a man of his calibre would be.

The partial disintegration of the family in modern society has many causes, but by far and away the greatest cause is undoubtedly welfare and its attendant distortions and perverse incentives. The increasing visibilty of gays has nothing to do with it.

But this leads to an interesting question. Is there a 'fixed' level of homosexuality? Are we now just seeing more gay people, who were always there beforehand but hiding with Kenneth Williams in the closet? Or has the number of gay people gone up because of the destruction of the family due to the introduction of the welfare state, and its general raising of time preferences? Do artificial societies such as prisons or welfare states, increase time preferences, and therefore lead to behaviour patterns different from the 'normal' pattern?

And if they did, should we do anything about it? And if so, what?

I'm going to have to think about this...

Thank you for posting such an intelligent and civil comment. It makes running a tiny web site like this, an illuminating experience.

Jack Maturin said...

I am not teasing you. I just wanted to test to what degree you agree with Hoppe.

Well, Ok, I'm not an entirely uncritical supporter of Hoppe, as I believe my reply to Julius above demonstrates. And when I first read 'Democracy: The God that Failed', I was also knocked back by the line he took on homosexuals.

But on the right to exclude people from your own private property, whatever the merits of the case, I fully support him. It was after reading his 'Theory on Socialism and Capitalism' that I began to be able to see where he was going with the homosexual thing, particularly on the time preference side. I may be unable to explain this very well, but then we are not all blessed with such gifts.

I'm not going to bore you with the quote 'some of my best friends are gay', but some have been in the past. One even 'came out' on me once, in bar, which was quite an experience. It is the long-term viability of a libertarian society which interests me, not what people do with private bed partners. But there will be no point getting to a libertarian wonderland, if it collapses back in our faces. And so whatever shocking thoughts it takes to get us there permanently, into a position where we can achieve a lasting form of anarcho-capitalism, works for me.

And I am greatly looking forward to Professor Block's critique of time preferences, which could clear up a lot of these related issues (or provoke other storms of debate!)

I prefer not to get publically involved in intra-libertarian disputes.

But you should, otherwise the truth, whatever the heck it is, is more likely to remain uncovered. Hegel may have been a pet philosopher of a Prussian King, but his dialectical process is a great tool for debunking nonsense; I've spoken enough nonsense in my time, I should know. Just pick a nom de plume and stick to it. I believe even Uncle Murray Rothbard used 'Aubrey Herbert' whenever he wanted to say something controversial.

Julius Blumfeld said...

Thanks to Jack and Anon for further thoughts on FRB. I shall do some more reading (my first instinct is that the "fraud" that might be committed by a borrower who includes amongst his declared assets, money held on deposit with a FR bank is also a matter of contract between the borrower and the lender).

Julius Blumfeld said...

I remain confused as to the respect in which it is said that gays pose a "threat" to families.

The fact that gays do not (generally) have children is irrelant. Bachelors do not have children but they are no threat to families.

Nor is the fact that some children might be more likely to chose to be gay if gays are more visible generally. How is the fact that a child becomes gay, damaging to family values? Are gay children worse children? Do they love their parents and siblings less? I rather doubt it! They might be less likely to have grandchildren and that is painful to parents, but that is nothing to do with damage to family values. It is simply a consequence of the life choices of a particular individual.

Genuine, as opposed to spurious, threats to families are the work of the State. E.g.

1. State regulation in its myriad forms, of family life.
2. State funding of single parents.
3. States encouraging children to betray family confidences
4. State-inspired moral panics about pedophilia
5. State funding of nursery care
6. State funding of working mothers
7. State funded education.
I could go on.

All of these pose a genuine threat to family life. Gays do not.

Of course it maybe that even in the absence of a State, the family form might develop into something else, through voluntary processes (just as alternative structures have been tried on Kibbutzim in Israel).

If so, so be it. That will only happen if people freely chose some alternative way of organising their lives. And if they do so, how could a libertarian object? I happen to think that the family is a prudentially good way to bring up children, but there is always a risk that I might be wrong! And only in a free society will my error be exposed.

Julius Blumfeld said...

Jack I have now re-read your discussion of FRB above. I agree entirely with your analysis of the distinction between what you/Mises call a claim transaction and credit transaction (although I am more familiar with the legal terminology of bailment and debt).

But what I don't understand is why any of this is a bad thing, as opposed to simply being another kind of voluntary transaction between consenting adults. In partciular, I don't understand what the adverse third party effects could be (which would be the only grounds for legal regulation of FRB)

But I shall read more .....

Jack Maturin said...

On the money front, as with the whole Hoppe-gay issue, I think we would have to have our secessionist revolution and see what happened.

But I, personally, would not choose to take payments for my goods and services in credit transaction notes, in the same way that I wouldn't accept payments in IOUs.

I suspect many others would also like to avoid the risk of being paid in IOUs, and would also prefer cash. But that to me is the distinction. FRB notes are IOUs (possibly good ones, but always with appreciable risk attached). 100%RB notes are cash (with a far smaller risk level).

It has only been the interference of the state in the money market which has created the blurring between the two. Once the state is removed from the money market, I'm confident cash will be far and away the most preferred form of payment, just like it was before the state got involved.

But like you say, let the market decide. You already know where my bet is placed.

Julius Blumfeld said...

"But like you say, let the market decide."

Absolutely. From which it follows that in a free market, FRB ought not to be banned.

Anonymous said...

And from which it also follows that, whatever the particular policies of Hoppe Bay, gays ought not to be banned either.