Category Archives: Economics

Anti-Trust Laws Are Not the Answer

Austrian economist Bob Murphy recently appeared on Timcast IRL. Among the topics discussed, there was a brief discussion of anti-trust laws that was left with a dissatisfying “I-guess-there’s-nothing-we-can-do-about-it” answer.

The argument host Tim Pool made for anti-trust laws rests upon the assumption that in a free market, successful market actors can accumulate so much wealth that they exercise “power” just as oppressive as a tyrannical government’s. Pool cited as an example Blackrock buying up houses and using its vast accumulated resources to effectively outbid any smaller or individual bidders.

Pool said that companies like Blackrock will acquire assets by offering “insane sums of money,” i.e., paying well over the market price. Eventually, the large company or a few of the largest companies “own everything” and the common folk “own nothing.” Pool asks Murphy if he would support anti-trust laws to address such a situation.

Murphy gave all the correct answers but didn’t elaborate upon them. He pointed out we aren’t operating in a free market, specifically mentioning bailouts, and that it never helps to give the government more power. Pool agreed empowering the government doesn’t work but concluded there is nothing anyone can do about undesirable economic outcomes. Anyone watching would assume this is a defect of the free market one must live with or tolerate government intervention.

That’s the opposite of the truth.

First, as Murphy said, the U.S. economy is not remotely a free market. I would add that it hasn’t been since at least the New Deal, when a fundamental, constitutional change took place.

No longer is economic activity regulated solely by laws passed by Congress and signed by the president. Instead, a plethora of executive branch bureaucrats write enforceable regulations which are at most overseen by a Congressional committee, but which largely bypass the adversarial process of passing a law per the Constitution.

These agencies don’t merely protect property rights but instead micromanage the way businesses are run for all sorts of ends, legitimate and otherwise. This adds cost, stifles innovation, and inevitably succumbs to regulatory capture. All of these effects tilt the playing field towards larger firms and away from smaller or new competitors.

Monetary inflation and bailouts also contribute to the problem. Pool says that large firms like Blackrock pay far more than the market price “because they can.” But how can Blackrock afford to give away its wealth?

If Blackrock pays $230,000 for a house worth only $200,000 (Pool’s example), they have transferred $30,000 in wealth from themselves to the seller of the house. The seller has gained $230,000 in cash while Blackrock has gained only $200,000 in real estate.

That the property in question may appreciate enough to overcome such a loss is completely the result of monetary inflation. Houses are depreciable goods. They wear out and are eventually torn down and replaced. In a free market, the price of a house should go down over time (all other things being equal*), just like the price of an automobile.

Conversely, honest money appreciates over time. It is the natural tendency for prices to fall as society produces more output with the same or less inputs. That’s why prices fell over the course of the 19th century under various iterations of the gold standard. It is only monetary inflation that causes prices to rise even as society becomes more productive.

With an honest monetary system, it would not be profitable for any firm, no matter how big, to buy houses at prices well above their market value. Doing so would make the firm poorer over time and those it bought the house from richer – precisely the opposite result of the big firm “owning everything” and the common folk “owning nothing.”

But even with our present monetary system, under which real estate prices are bid up to absurd levels during inflation-infused bubbles, there are inevitable busts. When those occur, any firm that acquired substantial real estate holdings at inflated prices should go bankrupt, its assets turned over to new owners in bankruptcy court. However, for the past several decades, this market result has increasingly been overridden by “too big to fail” bailouts. It didn’t start with the 2008 financial crisis; the 1979 Chrysler bailout and 1998 Long Term Capital Management bailouts are notable previous examples.

Bailouts don’t just encourage reckless behavior; they reverse natural market outcomes. If not for the 2008-9 TARP bailouts, the country’s largest firms, including Goldman Sachs, Citibank, Bank of America, and others would either have gone bankrupt or been significantly downsized. Smaller firms that didn’t engage in irresponsible behavior would have acquired their assets, their market share, or both. That would have been the free market result.

Incidentally, while Blackrock itself was already a big player in financial markets before the 2008 crisis, it only became the behemoth it is today by first encouraging its clients to purchase the toxic mortgage-back securities at the center of the meltdown and then becoming the Federal Reserve’s partner in bailing out those same firms. That cosey relationship has continued right through the current “Covid-19” economic crisis.

In other words, nothing about Pool’s scenario represents a market result and anti-trust laws attempting to counteract it are the epitome of the government “breaking your leg and handing you a crutch.” Just as the welfare crutch brings with it little relief and all sorts of unintended, negative consequences, anti-trust laws typically result in consumers paying more for the same products and society becoming less productive overall.

Even more important, supporting the use of anti-trust laws against dominant corporations is a strategic blunder for anyone who believes in private property and free markets. Yes, they might be used to temporarily hinder large corporations whose behavior we don’t like. But getting the remnant who support freedom on board with this state intervention will forever set the precedent that even the most ardent supporters of laissez faire recognize the need for intervention under some circumstances.

The enemies of freedom think strategically. That’s why they’ve been winning for the past century or more. When the TARP bailouts occurred, there was a loud minority on the pro-market side saying, “let these corporations go bankrupt. Let the market work.” That those statements are a matter of record is a thorn in the side of the interventionists that they’d rather didn’t exist.

This time around, they would like nothing better than to have even the most uncompromising advocates for laissez faire on the record supporting anti-trust laws or other government interventions. That would take laissez faire off the table forever in terms of future debate regarding private property and freedom vs. central planning and state intervention.

Don’t give the central planners that win.

The answer to grotesque economic outcomes is not more government intervention. The answer is to allow for a market-based monetary system (repeal capital gains taxes on competing currencies like precious metals and crypto), prohibit future bailouts, and repeal the New Deal root and branch.

*A property far from convenient shopping, recreation, schools, and other amenities which later development provides nearby may appreciate in value overall even as the house itself depreciates, but this is the exception rather than the rule.

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

If you’re really against fascism, repeal the New Deal root and branch

fdr signingIf there is one thing the American political right and left agree on, it’s that the other side is fascist. The left thinks Trump is Mussolini; the right points to Big Tech suppressing political dissent. We even have an organization that styles itself, “AntiFa,” its chief means for fighting fascism being to dress all in black and beat its political opponents with clubs.

We live in interesting times.

But for all the accusations of fascism, justified or not, no one ever makes mention of the overtly fascist institution that dominates a large part of our lives: the New Deal.

No, I don’t mean the Green one, proposed by democratic socialist Alexandria Ocasio-Cortez and others. I mean the now hoary, 88-year-old New Deal inspired directly by Mussolini’s fascism and praised both by Adolph Hitler and Il Duce himself.

This isn’t to equate the whole of Roosevelt’s governance to Hitler’s or Mussolini’s. But in economic terms, Roosevelt was in lockstep with the fascists.

Fascism rejected socialism’s government ownership of the means of production. For this reason, the left imagines fascism to be an extreme form of capitalism. It isn’t. Fascism was more anti-capitalist than it was anti-socialist, according to Mussolini himself.

As Mussolini wrote, “Fascism is definitely and absolutely opposed to the doctrines of liberalism, both in the political and the economic sphere…The Fascist State lays claim to rule in the economic field no less than in others.”

Fascism left business ownership in private hands, but at state direction. Business owners may have retained title ownership, but they largely produced what the state told them to produce, sold at prices dictated by the state, and made future plans based upon the needs and dictates of the state, rather than their individual interpretation of market signals.

FDR did precisely the same things under the pretense of fighting the Depression. The Supreme Court struck down a few of his worst abuses, but the fascist regulatory structure he built not only remains in place to this day; it continues to metastasize.

Fascism was also anti-democratic. It was “opposed to that form of democracy which equates a nation to the majority,” wrote Mussolini. Thus, the rules governing society, including economic activity, were made by an unelected bureaucracy taking its direction from a supreme leader who embodied the state and therefore the spirit of the nation.

The New Deal is similarly anti-democratic. Not only does it transfer myriad decisions previously made by private business owners to the government; it allows those decisions to be made by unelected bureaucrats in the executive branch.

This unconstitutional transfer of legislative power from Congress to the executive was rationalized away by New Dealers and their SCOTUS enablers by drawing an arbitrary distinction between legislation and “regulation.” This is dishonest. Whenever government officials write enforceable directives that either require or prohibit human action, they are legislating, no matter what those written directives are called.

These regulations are presented to the public with benign motivations like safety and fairness, just as Mussolini posited his fascist state, “concentrates, controls, harmonizes and tempers the interests of all social classes, which are thereby protected in equal measure.”

In effect, they amount to the government dictating the minute details of business operations to the owners.

This has several deleterious effects. First, it stifles creativity. Enforcing compliance with hundreds of thousands of regulations naturally tends towards all businesses being run the same way. Revolutionary improvements like the assembly line and mass production could never have occurred under the New Deal.

Who knows what innovation has been stifled since?

Second, all this compliance has a cost, which is much more easily borne by large firms than small ones. As time goes by and the regulatory burden gets heavier, the advantage of large firms over small widens. This has the effect of promoting consolidation and elimination of marginal producers.

In a laissez faire market, there is always a natural tension between large firms with economies of scale and smaller ones that can adapt more quickly to changing market conditions. Both the cost burden of regulation and its stifling of innovation neutralize the strengths of smaller firms and tilt the playing field dramatically towards large ones.

Yet, ironically, the New Deal is most staunchly defended by progressives who claim to oppose big business and support “the little guy.”

Third, the New Deal inevitably leads to what we now call, “regulatory capture,” meaning the large corporations themselves writing the regulations that govern them. When the government’s job is merely to prosecute crimes and referee civil actions, it can be accomplished by competent attorneys. But when the government aspires to regulate the minute details of business operations, it requires in-depth knowledge of the regulated industries, including understanding of sophisticated machinery and other technologies, supply chains, specific market conditions, etc.

Only an industry insider can provide that level of expertise. And so, the government must go to these insiders for recommendations on how to make their own industries “safer,” “fairer,” etc. Naturally, the government will turn to the largest firms, understood to be the most efficient, and who also have the money to lobby.

Anyone truly committed to ridding America of fascism should concern themselves less with what politicians they don’t like say or post on social media and instead support repealing the New Deal root and branch.

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

The government can’t make realities like scarcity go away

magicWhenever I point out the predictable (and often predicted) negative consequences of a particular government intervention, someone will invariably come back with, “Oh yeah, what’s YOUR solution, smartypants!”

Like that’s some sort of zinger.

In almost every case, the inquisitor is looking for me to propose an alternative government solution, when the obvious recommendation implicit in my post was, “Stop letting the government…”

No matter how high the past failures mount up (drug war, education, health care, war on “terror”), they’re always ready to call in the government again.

It’s almost as if they can’t confront the reality that, as the great John Bender put it, “The world is an imperfect place; screws fall out all the time.” They are constantly looking for someone, usually a politician, to wave a magic wand and make realities like scarcity go away.

How many examples will it take? How many thousands of repetitions do they require before every day isn’t their first day?

What would it take for people like this to acknowledge:

1. Some problems can’t be solved. We just have to learn to live with them.

2. In a world of scarce resources, the voluntary cooperation of the market always produces the best outcomes.

3. In that same world, the government always produces the worst outcomes.

Freedom is impossible without confronting reality.

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

When the Coronavirus Shutdown is over, will anyone blame their governments for the economic devastation they caused?

The Dow and S&P 500 were both down nearly eight percent, the largest drop since 1931 according to data from LPL Research. FULL CREDIT: Fotosearch/Archive Photos/Getty Images

The expectation that governments (local, state, federal) allowing people to go back to work in a few weeks or a month will mean the economy will immediately be just like it was in January is delusional.

Long-term and permanent damage is being done. Some businesses will close. Some will never rehire all the staff they once employed.

Risk aversion will skyrocket because there is no reason to believe governments won’t do this again in the future, perhaps perennially over less and less significant threats.

Would you put your life savings into a business knowing the government might close it down indefinitely next flu season?

Will anyone bother to track the increased suicide and drug overdose rates caused by massive unemployment?

Will anyone bother to track the increased mortality rates of other illnesses untreated, either during the shutdown or because of the government-inflicted economic depression after it?

Will anyone question the wisdom of previously allowing the FDA to limit competition in drugs and medical supplies (face masks, ventilators, etc.) resulting in shortages when we needed them most?

Will anyone point to these and other obvious negative consequences of government policies and not ask for more government to address them?

In other words, is there any chance we emerge from this epidemic bearing any resemblance to a relatively free and prosperous society?

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

‘Inflation is low’: The Federal Reserve’s Scam of the Century

MW-HG082_jay_po_20190321070916_ZQIn the wake of the federal government’s $2 trillion fiscal monstrosity and the Federal Reserve’s even more monstrous promise to create new money and credit with no limit whatsoever, it is a good time to reiterate a point I’ve made before: the claim that “inflation” has been low over the past ten years is a scam.

No, I’m not talking about the real definition of “inflation” being the creation of new money and credit, rather than the resulting rise in prices. Nor am I merely claiming the inflation rate is underreported due to all the tricks played with the numbers (hedonic adjustments, substitution, etc.).

I’m saying the claim that prices are not higher because of all the previous quantitative easing is a bald-faced lie. It represents perhaps the biggest gaslighting of an entire population in human history. And because it’s been so successful, the Fed is about to do it again.

The Fed reports the consumer price inflation rate over the past ten years as ranging from about 1.5% to 2.4%, not counting a few outlying years. The average from 2010 – 2019 was 1.77%. The Fed then tells us that low number proves its massive inflation of the currency during the last decade “hasn’t resulted in inflation,” by which they mean a rise in the price of consumer goods. But it has.

The key to this deception is its false premise: that one should compare the prices of goods and services this year to what they were last year. That’s the wrong comparison.

The correct comparison would be between what prices are today vs. what they would be without quantitative easing. Perhaps they wouldn’t be higher at all. Perhaps they would be lower.

Perhaps they should be lower.

Obviously, we don’t get to do a controlled experiment where we relive the past ten years with the Fed’s printing press shut down. But we can look at other factors influencing prices and draw some reasonable conclusions.

One major factor is automation. Donald Trump got elected largely based on his claim that unfair trade deals have destroyed American manufacturing, sending manufacturing jobs overseas. This may play well with unemployed Rust Belters, but there is one problem: American manufacturing hit its all time high in 2007, long after NAFTA and long before Trump got into politics.

It wasn’t trade deals that took away the jobs; it was automation. That means the American economy is producing far more manufactured goods with far fewer people. And this trend isn’t limited to the manufacturing sector. It is ubiquitous across the economy, from robots in warehouses to automated kiosk ordering in fast food restaurants.

So dramatic has been this trend that another presidential candidate, Andrew Yang, campaigned on the idea that we need a “universal basic income” because of all the jobs being eliminated.

Yang’s argument rests upon an old fallacy, but one thing is certain: Automation represents a huge deflationary force on consumer goods prices, as does a host of other trends like ever more powerful computing capabilities, web retail replacing brick and mortar stores, etc.

For these reasons and others, GDP has continued to rise, albeit modestly, during the mass retirements of the baby boomers. So, the increase in total goods produced combined with the decreased demand represented by retiring baby boomers should result in falling consumer prices.

Instead, the Fed’s QE and other monetary inflation interventions – injecting massive amounts of new dollars into the economy – have overcome massive price deflationary forces to make consumer prices rise modestly when they should have been falling.

Falling prices raise real wages, even when nominal wages don’t rise. To put it in topical terms, if the price of toilet paper falls from $2 per roll to $1 dollar per roll, you can buy twice as much toilet paper without getting a raise. Ditto consumer goods in general.

The Fed has a whole story about why falling prices would be catastrophic. But falling prices are what naturally happens as society produces more per capita.

Don’t believe me? Take another look at the Fed’s inflation table, this time from 1800 – 1899, most of which time the U.S. was on a gold standard.

If you make a spreadsheet multiplying a basket of goods costing $100 in 1800 by the inflation rate each year, you’ll see something quite startling.

Nevermind, I did it for you.

That’s right. Prices fell dramatically over the course of the 19th century. A basket of goods that cost $100 in 1800 cost only $48.94 in 1899. That means one could buy twice as much with the same wages in 1899 as one could in 1800.

Falling prices are the natural result of a more productive economy. But as the Fed’s inflation table also shows, it has always overcome this natural tendency and made prices rise (the Fed was created in 1913). That same basket of goods that fell from $100 in 1800 to $48.94 in 1899 cost $1,498.45 in 2019. It should have cost something like $24.00, or even less considering accelerating innovation.

Yes, monetary inflation eventually raises wages, too, but always more slowly than it raises consumer goods, making wage earners poorer while the beneficiaries of inflation – mostly in the financial sector – get richer.

Get it yet? You’re being ripped off on a massive scale. You’ve been ripped off by the monetary system your whole life as automation and other innovations allowing society as a whole to produce more goods and services should have made prices fall even faster than usual.

You’ve been had. And now the Fed is going to use its disinformation about consumer prices to take you again.

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

The Government Declares War on Market Prices Just When We Need Them Most

Price Gouging Summed UpMarket prices are the foundation of civilization. They are the signal that tells producers how much of any one thing to produce. They tell consumers how much to consume or whether to consume a product at all. The reason retailers don’t normally throw away eighty percent of their stock is because market prices tell them how much to have on hand at any one time to meet current demand.

When they miscalculate and buy a little too much, they still don’t typically waste their stock. They put it on sale and meet the demand at a lower price.

To the extent the market is allowed to set prices, producers generally produce what consumers want to buy in the quantities they want to buy. When all supply is consumed and large amounts of consumers are not left with unmet demand, it is referred to as the market “clearing.”

The government is always and everywhere at war with market prices. Regulations creating barriers to entry limit supply, artificially inflating prices. Price controls, including “anti-price gouging” laws override market prices, creating shortages. Subsidies to producers (farm subsidies, for example), allow producers to limit supply, artificially inflating the price.

Federal Reserve monetary inflation juices up demand, both on the consumer side and the producer side, creating overconsumption, low savings rates, malinvestment and imprudent debt. This ongoing war on the market price of money, a.k.a. “the rate of interest” does all sorts of damage in the real economy. It directs companies to borrow money to expand production of products for which there is no real demand. That in turn sends workers into these zombie industries.

Even without an external problem like the coronavirus (and the much more harmful government response to the coronavirus), bubbles created by monetary inflation eventually pop. Then all the malinvestment is exposed, the imprudent debt defaults, and the workers employed in unprofitable ventures get laid off. This is the market telling everyone where the mistakes were made.

Right now, we have two economic crises at once. We have state governments literally ordering people to stop producing goods and services in an attempt to combat the spread of the virus. Whether that is the best course of action is a subject for a different time. That it is doing massive economic damage is indisputable.

That damage has caused a second crisis: it has popped the economic bubble blown up by the Federal Reserve over the past twelve years. The market is responding by trying to adjust prices to their market levels. It is lowering the artificially high prices of stocks. It will lower the artificially high price of real estate. The price of oil has fallen both because of the anticipated reduced demand and the increased supply from Russia and OPEC increasing their oil production.

But not all prices are falling. Given the surge in demand, the market is trying to raise the price of items like toilet paper, certain medical supplies and other essential items.

All these price adjustments by the market are essential for our well-being. They are the cure for the economic disease caused by the government response to the virus and the previous twelve years of monetary inflation and artificially low interest rates.

What is the government doing in response? It is escalating its usual, conventional war on market prices to a nuclear war. It is punishing suppliers of essential goods for raising prices. It is ramping up monetary inflation to historic levels to keep stock prices artificially high and unprofitable businesses alive to go on producing products for which there is no demand. At a time when market prices are more essential to our survival than ever, the government is doing more to override them than ever.

This is not an academic theory that only works on a graph in a classroom. This plays out before our very eyes in the form of essential goods not available to us at any price.

Why is there no toilet paper available? Ask most people and they will say it is because of “hoarders.” These are people who bought far more than they needed in anticipation of future shortages. The people who arrived at the store after the toilet paper is sold out vilify them. Others might just call them prudent.

The same people who vilify hoarders also vilify “price gougers.” They don’t seem to grasp the obvious cause/effect relationship here. If it weren’t for artificial limits on price, i.e., “anti-price gouging” laws, the price of toilet paper would rise dramatically with the surge in demand and the so-called hoarders would not be able to buy nearly as much. That would leave far more for everyone else. The toilet paper market would find the optimal price level where the greatest number of people could get what they need.

We may be able to laugh off the shortage of toilet paper, but when it comes to food, water, medical supplies and other important items, shortages are no laughing matter. Why are there not enough ventilators right now? Because government regulation raises the price of entry into the market and lengthens the lead time for new production. If not for these artificial barriers, hundreds of new ventilator producers would seize the opportunity to enter the market and sell ventilators.

Instead, the government is considering ordering companies who make related items to make ventilators instead. That will only result in less efficient production of ventilators and shortages in the products those manufacturers would otherwise produce.

This is only the tip of the iceberg in terms of the government overriding market prices. Every economic policy the government undertakes is at its root an attempt to do so. Every single one makes us poorer than we would be if the government did nothing.

The free market doesn’t produce perfect outcomes. It’s an imperfect world. But a free market produces the best possible outcomes in the real world of scarcity and occasional disasters. Prices are the lifeblood of the free market. They are what make it produce the best outcomes. Every time the government overrides market prices, it makes things worse – in most cases, unfortunately, to thunderous applause.

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

The State and Federal Governments’ Coronavirus Response Will Dwarf Economic Damage Done by FDR

depression-1During the 1930s, FDR managed to prolong the depression he inherited for over a decade by unleashing a vast array of wrongheaded economic interventions on an economy trying to correct itself from the malinvestments that occurred during the 1920s.

Whenever a financial bubble pops, prices fall from their artificially high levels, seeking their true, market level. This is the market’s way of liquidating the malinvestments and imprudent debt that resulted from prior central bank monetary inflation, which artificially raised prices and lowered the cost of borrowing and investing.

Many of FDR’s New Deal interventions proceeded from the economically idiotic belief that preventing prices from falling would help. So, for example, he used taxpayer funds to pay farmers to produce less crops at the same time many were going hungry. By lowering the supply of crops, he hoped to raise their prices.

But he never ordered people to produce nothing at all.

Today, the federal and state governments are doing just that, albeit for supposed public health reasons rather than economic ones. State governments are in many cases ordering most of their populations to stop producing anything whatsoever, while the federal government promises to reimburse their losses.

Reimburse them with what money, you ask? Good question.

Regardless, the economic devastation that will result from this economy-wide shutdown will dwarf the damage FDR did during the so-called “Great Depression.” If simply limiting production caused a decade-long crisis (and it really didn’t end until after WWII), ceasing production altogether will obviously be worse. How much worse depends upon how long the insanity lasts.

As far as that is concerned, never underestimate a government.

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

Sam Cooke’s “Rosa Parks Moment”

sam_cooke_billboardThere are a lot of reasons to watch Remastered: The Two Killings of Sam Cooke (available on Netflix), least of which is speculation about the circumstances of his death. The best reason to watch this documentary is the story of Cooke’s life, the story of a very different kind of civil rights leader of the 1950s and ‘60s. Cooke didn’t seek racial justice through political action; he pursued it through success in the business world.

“One of these days, the world is going to know Sam Cooke, and I’m going to help my people,” he said, as quoted in the film.

Cooke was born in Mississippi, but his father, Reverend Charles Cook, moved the family to Chicago early in Sam’s life. Rev. Cook started a church in the Bronzeville section of Chicago, which at the time was home to hundreds of small businesses owned by African-Americans.

Bronzeville was a beautiful place. In that corridor from 43rd and State Street to 51st Street, there must have been two to three hundred black businesses that were vibrant—segregated, of course, all black. It was like a black Wall Street,

said Spencer Leak, himself a black business owner whose family’s funeral home held the first funeral service for Cooke (there was a second funeral in Los Angeles).

So, Sam Cooke grew up in a neighborhood teeming with black entrepreneurs, looking up to a father who himself had made his own way in a world that didn’t exactly set the table for him.

Read the rest at Foundation for Economic Education…

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

Trump Winning the Trade War Would Make China Stronger, Not Weaker

trump chinaWe don’t win anymore,” said candidate Donald Trump numerous times during his 2016 presidential campaign, referring to America’s trade relationship with other countries. Trump and tens of millions of his supporters hold the protectionist view that trade, like all human relationships, is a war that must be “won.” Rather than exchanges that leave both parties better off, protectionists see trade as a zero-sum game in which one side benefits at the other’s expense.

Fair Trade Over Free Trade

The president has said on more than one occasion that he supports free trade, but he insists it must be fair, meaning that China or other partners reciprocate any relief from tariffs and other burdens placed on their exports. And it is true that China has not treated American exports to China the way America has treated Chinese exports to America.

China has been more protectionist and is likely engaging in some subsidization and/or other government assistance to its exporters, even if it and its effect on America’s trade deficit with China are greatly exaggerated. Americans would be better off with zero tariffs and completely free trade regarding its imports.

Regardless, Trump and his supporters draw completely the wrong conclusion. Persuading Xi Jinping to adopt free trade policies would make China’s economy stronger, not weaker.

Read the rest at Foundation for Economic Education…

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

The Federal Reserve has crossed the balance sheet Rubicon

Fed balance sheet (2)Federal Reserve Chairman Jerome Powell tried once more to tell U.S. markets what they wanted to hear, saying the Fed would ‘soon announce measures to add to the supply of reserves over time.”

A little history lesson for my younger readers:

Back in January 2008, the Fed’s balance sheet was approximately $880 billion in assets.Those were mostly securities (exclusively or mostly U.S. Treasury bonds) purchased in the past during monetary expansions (when the Fed buys a security from a member bank, it takes in the security and gives the member bank U.S. dollars, meaning there are more dollars available to lend out into the economy).

During its various rounds of “quantitative easing” and other inflationary programs in the years after the 2008 crisis, the Fed’s balance sheet increased to over $4.4 trillion. This was a once-in-a-lifetime thing, said the Fed at the time, and the balance sheet would quickly be “normalized” when the once-in-a-lifetime crisis was past.

Well, the Fed began normalizing its balance sheet in late 2017 (with the president screaming bloody murder the whole time) and got down to about $3.7 trillion – still over four times what it was in January 2008.

The normalization effort didn’t last long. Despite Powell’s comments, the Fed actually began adding to its balance sheet again in August. It’s now back to $3.945 trillion – a $200 billion increase in just two months. In other words, the Fed just added to its balance sheet in those two months 1/4 of what it added during its first 95 years of existence (1913 – 2008). This in an economy the Fed says is strong.

The Rubicon is in the rear view mirror. Where this monetary mayhem will take us is anyone’s guess.

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.