Stop SOPA and PIPA

Economic Freedom is Good

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Cartoon: Rhetoric or Reality

Where does someone who supports economic liberty belong?

See Jacob Hornberger's 11 part essay

or read a recent essay by Walter Williams

After reading Hornberger’s “Economic Liberty and the Constitution,” one
cannot avoid the conclusion that the liberties envisioned by the nation’s
founders have been under siege, trivialized and nullified. Philosopher Johann
Wolfgang von Goethe explained that “no one is as hopelessly enslaved as the
person who thinks he's free.” That’s becoming an apt description for Americans
who are oblivious to -- or ignorant of -- the liberties we’ve lost.

Walter Williams 8/24/11

Economic Freedom and Quality of Life

What Kind of Freedom?

Obama to award Medal of Freedom to 15, including investor Buffett ... President Obama will award the Medal of Freedom to billionaire investor Warren Buffett, one of 15 recipients who will be given the country's highest civilian honor, the White House said ... Among the other Medal of Freedom recipients will be former president George H.W. Bush; German Chancellor Angela Merkel ... poet Maya Angelou ... and labor chief John Sweeney. – Washington Post

Dominant Social Theme: The US government is at again, honoring the VIPs that mean the most to the American people.

Free-Market Analysis: We are reminded of a certain book when we read who is getting freedom medals from Barack Obama; but more on that at the end of this article. Warren Buffet is a kind of Keynesian socialist in our humble view...

Start with Buffet. Here is a man who constantly campaigns for increased taxes to be placed on US citizens, identifies himself as a Democrat and is worth something like US$50 billion. He poses as an investor, but really he makes "investments" in businesses that have hidden economic advantages, usually via regulatory loopholes. Of course Buffet may seem free-market oriented in the sense that he has made a fabulous fortune in the "investment game" – but when one examines his criteria for picking companies, it becomes obvious that one of them is mercantilism.

This means that Buffet values companies that in some way have developed access to the US government at state or federal levels and can pull levers of power available to no one else. Buffet is thus not investing in companies that necessarily have a better widget. He is putting his money into companies that are interacting most efficiently with government. He is not in his investing making a principled stand for entrepreneurialism or free markets but seeks out firms that have best exploited the current socialist and leveling environment of the US. It is difficult to reconcile this investment philosophy with freedom...

Conclusion: We started out this article by writing that the distribution of freedom medals to people who, at least in some cases, do not seem interested in the slightest in encouraging freedom reminded us of a certain book. Here is a quote from it. It is very famous and you should be able to figure it out quickly. As follows:

It was as though the world had turned upside-down ... Benjamin felt a nose nuzzling at his shoulder. He looked round. It was Clover. Her old eyes looked dimmer than ever. Without saying anything, she tugged gently at his mane and led him round to the end of the big barn, where the Seven Commandments were written. For a minute or two they stood gazing at the tatted wall with its white lettering.

"My sight is failing," she said finally. "Even when I was young I could not have read what was written there. But it appears to me that that wall looks different. Are the Seven Commandments the same as they used to be, Benjamin?"

For once Benjamin consented to break his rule, and he read out to her what was written on the wall. There was nothing there now except a single Commandment. It ran:

ALL ANIMALS ARE EQUAL BUT SOME ANIMALS ARE MORE EQUAL THAN OTHERS.

read the essay

Paul: “Government Can Not Create Prosperity”

The Free Market: A Litmus Test

Gary North writes:

Very few people believe in the free market. This is true of virtually all academic economists. The proof that they do not believe in the free market is that they oppose the creation of a full gold coin standard. They say they believe in the free market in many areas of life, but they do not believe in the free market with respect to the monetary system. Yet, above all other areas of the economy that ought to be governed by the free market, the money system should be. Why is this? Because money is the central institution in a market economy. Control over money is the central form of economic control.

We have seen this with a vengeance with the passing of the banking reform bill of 2010. The great winner in the reform is the Federal Reserve System. It receives the authority over the banking system. It is not limited merely to control over the money supply; it now possesses the authority of direct regulation and intervention.

The central banks of the world have now become allocators of capital. They are making the decisions as to who gets what and on what terms. Central planning over money increasingly has become central planning over the entire economy. This is not a mistake. This is consistent with the original logic of central banking. It means government control over the money supply.

When you hear a self-designated free market economist defend the idea of central banking, meaning a government-licensed monopoly over the monetary base, you can be sure that this person does not believe in the free market. He does not believe in the logic of decentralized private property. He believes in central planning, and he sees the central bank as the agency of such planning.

The few academic economists who are willing to accept even a pseudo-gold standard do not believe the government should be out of the money business. They do not believe in the widespread use of gold coins by the general population. They believe in central banks, and they believe in government control over the banking system.

What I recommend is simple: the removal of all government authority possessed by the Federal Reserve System. There would be no further legal connection between the Federal Reserve System and the United States government.

What would the result be? Within a few years, the Federal Reserve System would go bankrupt. This has been the fate of the two previous central banks of the United States. They could not operate in a competitive environment. They could operate only by means of a grant of monopolistic power by the United States government. So, I am not at all worried about the operation of the Federal Reserve System without government supervision. Besides, there is no government supervision of the Federal Reserve System. There is supervision of the government by the Federal Reserve System. Congress does not control the FED: the FED controls Congress. This has been true since 1914, and it is not likely to change...

If we were to abolish the Federal Reserve System, and if the government would then transfer to American voters all of the gold presently said to be in the vaults of the Federal Reserve Bank of New York and Fort Knox, we would see the restoration of liberty. I can think of no other pair of laws that would transfer more authority to the voters the abolition of the Federal Reserve system and transfer of the gold in the form of tenth-ounce coins back to the voters. This is why this essay is hypothetical.

Who are the opponents of such a procedure? First, the Congress of the United States. Second, all the bureaucrats who work for the Federal government. Third, all of the decision-makers of the Federal Reserve System. Fourth, the vast majority of all commercial bankers. Fifth, the entire academic economics profession. This is why we are unlikely to see this pair of laws passed in our generation.

read the entire essay

Mismanaging the Economy

Jacob Hornberger writes:

What’s the real solution to America’s economic woes?

It lies in asking ourselves a fundamental question: Should the role of government in a free society be to manage an economy?

The answer is: No, absolutely not. The government has no more business managing an economy than it does managing people’s religious activities.

After all, what is an economy? It’s really just people sustaining and improving their lives and interacting with others in economic matters. It’s an intricate and complex process that involves countless people producing goods and services and exchanging them with others.

So, when the president purports to manage the economy, what he’s really doing is attempting to manage, control, direct, or influence the economic decisions of hundreds of millions of people, each of whom is trying to plan and direct his own affairs. In other words, one man — or group of people in the federal government — purports to plan, in a top-down, command-and-control manner, the economic decisions of countless people, a phenomenon that the Nobel Prize winning libertarian economist Friedrich Hayek called a “fatal conceit.“ It cannot be done, and in fact all that it produces is crisis and chaos.

The problem Americans face is not that President Obama is mismanaging the economy. The problem is a systemic one, one that delegates to the president the authority to manage the economy.

The solution to America’s economic woes lies not in getting better people in public office who can better manage the economy. The solution lies in prohibiting government officials from managing the economy. Managing the economy is not a legitimate function of government in a free society, and in fact is the root cause of a nation’s economic woes.

The French have a term for this: “Laissez faire, laissez passer.“ Let it be, let it pass. Leave people free to manage their own economic affairs. Separate economy and the state in the same way that our American ancestors separated church and state.

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Cartoon: Freedom v. the Nanny State

Economic Freedom: US #8

Fundamentally, there are only two ways of co-ordinating the economic activities of millions. One is central direction involving the use of coercion—the technique of the army and of the modern totalitarian state. The other is voluntary co-operation of individuals—the technique of the market place.

—Milton Friedman

Measuring Economic Freedom
The measurement of economic freedom in countries as different as Hong Kong and North Korea, Zimbabwe and Singapore, or Australia and Cuba presents formidable challenges. As the number and variety of countries included in the Index have increased, it has become ever more difficult to find consistent and reliable data. We are indebted to the various international organizations, both governmental and non-governmental, that have undertaken the arduous task of data collection in their various areas of focus and have shared their data with us.
The Index of Economic Freedom is comprehensive in its view of economic freedom as well as in its worldwide coverage of countries. The Index looks at economic freedom from 10 different viewpoints. Some aspects of economic freedom are external in nature, measuring the extent of an economy’s openness to global investment or trade. Most are internal in nature, assessing the liberty of individuals to use their labor or finances without restraint and government interference. Each is vital to the development of personal and national prosperity. The fundamental right of property, for example, has been recognized for centuries by the great philosophers of liberty, such as Locke and Montesquieu, as a bulwark of free people.
Over time, scholars and practitioners have recognized many other pillars of economic liberty, including free trade, stable money, the right to work, control of government spending, and lower taxation. Each one illuminates some aspect of the relationship between the individual and the state, and all should be viewed in light of the fundamental principles of economic liberty—individual empowerment, non-discrimination, and open competition—outlined above.
The 10 specific economic freedoms measured in the Index of Economic Freedom are discussed below. Each of the freedoms is individually scored on a 0 to 100 scale. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms. Detailed information about the methodology used to score each component is contained in the appendix.

Freedom #1: Business Freedom
Business freedom is about an individual’s right to establish and run an enterprise without interference from the state. Burdensome and redundant regulatory rules are the most common barriers to the free conduct of entrepreneurial activities.
By increasing the costs of production, regulations can make it difficult for entrepreneurs to succeed in the marketplace. Although many regulations hinder business productivity and profitability, the most inhibiting to entrepreneurship are those associated with licensing new businesses.
In some countries, as well as many states in the United States, the procedure for obtaining a business license can be as simple as mailing in a registration form with a minimal fee. In Hong Kong, for example, obtaining a business license requires filling out a single form, and the process can be completed in a few hours. In other economies, such as India and parts of South America, the process of obtaining a business license can take much longer, involving endless trips to government offices and repeated encounters with officious and sometimes corrupt bureaucrats.
Once a business is open, government regulation may interfere with the normal decision-making or price-setting process. Interestingly, two countries with the same set of regulations can impose different regulatory burdens. If one country, for instance, applies its regulations evenly and transparently, it lowers the regulatory burden by enabling businesses to make long-term plans more easily. If the other applies regulations inconsistently, it raises the regulatory burden by creating an unpredictable business environment. Finally, regulations that make bankruptcy procedures onerous are also distortionary, providing disincentives for entrepreneurs to start businesses in the first place.

Freedom #2: Trade Freedom
Trade freedom reflects the openness of an economy to imports of goods and services from around the world and the ability of citizens to interact freely as buyers and sellers in the international marketplace.
Trade restrictions can manifest themselves in the form of taxes on imports and exports and quotas or outright bans on trade. However, trade restrictions also appear in more subtle ways, particularly in the form of regulatory barriers. The degree to which government hinders the free flow of foreign commerce has a direct bearing on the ability of individuals to pursue their economic goals and to maximize their productivity and well-being.
Tariffs, for example, directly increase the prices that local consumers pay for foreign imports, but they also distort production incentives for local producers, causing them to produce either a good in which they lack a comparative advantage or more of a protected good than is economically efficient. This impedes overall economic efficiency and growth. In many cases, trade limitations also put advanced-technology products and services beyond the reach of local entrepreneurs, limiting their own productive development.

Freedom #3: Fiscal Freedom
Fiscal freedom is a direct measure of the extent to which individuals and businesses are permitted by government to keep and control their income and wealth for their own benefit and use. A government can impose fiscal burdens on economic activity through taxation, but it also does so when it incurs debt that ultimately must be paid off through taxation.
The marginal tax rate confronting an individual is, in effect, the government’s cut of the profit from his or her next unit of work or engagement in a new entrepreneurial venture; whatever remains after the tax is subtracted is the individual’s actual reward for the effort. The higher the government’s cut, the lower the individual’s reward—and the lower the incentive to undertake the work at all. Higher tax rates interfere with the ability of individuals and firms to pursue their goals in the marketplace and reduce, on average, their willingness to work or invest.
While individual and corporate income tax rates are important to economic freedom, they are not a comprehensive measure of the tax burden. Governments impose many other indirect taxes, including payroll, sales, and excise taxes, tariffs, and the value-added tax (VAT). In the Index of Economic Freedom, the burden of these taxes is captured by measuring total government revenues from all forms of taxation as a percentage of total GDP.

Freedom #4: Government Spending
The burden of excessive government is a central issue in economic freedom, both in terms of generating revenue (see fiscal freedom) and in terms of spending. Some government spending, such as providing infrastructure or funding research or even improvements in human capital, may be thought of as investments. There are public goods whose benefits accrue broadly to society in ways that markets cannot appropriately price. All government spending, however, entails an opportunity cost equal to the value of the private consumption or investment that would have occurred had the resources involved been left in the private sector.
In other words, excessive government spending runs a great risk of crowding out private consumption, thereby thwarting the choices of individuals. Even worse, a government’s insulation from market discipline often leads to inefficiency, bureaucracy, lower productivity, and waste.
The government’s appetite for private resources affects both economic freedom and economic growth. Even if a state-managed economy achieves fast growth through heavy expenditure, it diminishes economic freedom in the process and can create long-term damage to a country’s growth potential.

Freedom #5: Monetary Freedom
Monetary freedom, reflected in a stable currency and market-determined prices, is to an economy what free speech is to democracy. Free people need a steady and reliable currency as a medium of exchange, unit of account, and store of value. Without monetary freedom, it is difficult to create long-term value or amass capital.
The value of a country’s currency is controlled largely by the monetary policy of its government. With a monetary policy that endeavors to fight inflation, maintain price stability, and preserve the nation’s wealth, people can rely on market prices for the foreseeable future. Investments, savings, and other longer-term plans can be made more confidently. An inflationary policy, by contrast, confiscates wealth like an invisible tax and also distorts prices, misallocates resources, and raises the cost of doing business.
There is no single accepted theory of the right monetary policy for a free society. At one time, the gold standard enjoyed widespread support. What characterizes almost all monetary theories today, however, is support for low inflation and an independent central bank. There is also now widespread recognition that price controls corrupt market efficiency and lead to shortages or surpluses.

Freedom #6: Investment Freedom
A free and open investment environment provides maximum entrepreneurial opportunities and incentives for expanded economic activity, productivity increases, and job creation. The benefits of such an environment flow not only to the individual companies that take the entrepreneurial risk in expectation of greater return, but also to society as a whole.
An effective investment framework will be characterized by transparency and equity, supporting all types of firms rather than just large or strategically important companies, and will encourage rather than discourage innovation and competition.
Restrictions on the movement of capital, both domestic and international, undermine the efficient allocation of resources and reduce productivity, distorting economic decision-making. Restrictions on cross-border investment can limit both inflows and outflows of capital, shrinking markets and reducing opportunities for growth.
In an environment in which individuals and companies are free to choose where and how to invest, capital will flow to its best use: to the sectors and activities where it is most needed and the returns are greatest. State action to redirect the flow of capital and limit choice is an imposition on the freedom of both the investor and the person seeking capital. The more restrictions a country imposes on investment, the lower its level of entrepreneurial activity.

Freedom #7: Financial Freedom
A transparent and open financial system ensures fairness in access to financing and promotes entrepreneurship. An open and free banking environment encourages competition to provide the most efficient financial intermediation between households and firms and between investors and entrepreneurs.
In an efficient banking environment that facilitates open and transparent access to financing, the marketplace is the primary source of protection for all parties involved in a financial transaction. Through a process driven by supply and demand, markets provide real-time information on prices and immediate discipline for those who have made bad decisions. This process depends on transparency in the market and the integrity of the information being made available. An effective regulatory system, through disclosure requirements and independent auditing, ensures both.
Increasingly, the central role played by banks is being complemented by other financial services that offer alternative means for raising capital or diversifying risk. As with the banking system, the useful role for government in regulating these institutions lies in ensuring transparency; disclosure of assets, liabilities, and risks; and ensuring integrity.
Banking and financial regulation by the state that goes beyond the assurance of transparency and honesty in financial markets can impede efficiency, increase the costs of financing entrepreneurial activity, and limit competition. If the government intervenes in the stock market, for instance, it contravenes the choices of millions of individuals by interfering with the pricing of capital—the most critical function of a market economy. Equity markets measure, on a continual basis, the expected profits and losses in publicly held companies. This measurement is essential in allocating capital resources to their highest-valued uses and thereby satisfying consumers’ most urgent requirements.
Similarly, government ownership or intervention in the insurance sector undermines the ability of providers to make that service available at prices that are based on risk and market conditions.

Freedom #8: Property Rights
The ability to accumulate private property and wealth is understood to be a central motivating force for workers and investors in a market economy. The recognition of private property rights, with sufficient rule of law to protect them, is a vital feature of a fully functioning market economy. Secure property rights give citizens the confidence to undertake entrepreneurial activities, save their income, and make long-term plans because they know that their income, savings, and property (both real and intellectual) are safe from unfair expropriation or theft.
The protection of private property requires an effective and honest judicial system that is available to all, equally and without discrimination. The independence, transparency, and effectiveness of the judicial system have proven to be key determinants of a country’s prospects for long-term economic growth. Such a system is also vital to the maintenance of peace and security and the protection of human rights.
A key aspect of property rights protection is the enforcement of contracts. The voluntary undertaking of contractual obligations is the foundation of the market system and the basis for economic specialization, gains from commercial exchange, and trade among nations. Even-handed government enforcement of private contracts is essential to ensuring equity and integrity in the marketplace.

Freedom #9: Freedom from Corruption
Corruption is defined as dishonesty or decay. In the context of governance, it can be defined as the failure of integrity in the system, a distortion by which individuals are able to gain personally at the expense of the whole. Political corruption manifests itself in many forms such as bribery, extortion, nepotism, cronyism, patronage, embezzlement, and, most commonly, graft, whereby public officials steal or profit illegitimately from public funds.
Corruption can infect all parts of an economy; there is a direct relationship between the extent of government regulation or other government intervention in economic activity and the amount of corruption. Almost any government regulation can provide an opportunity for bribery or graft. In addition, a government regulation or restriction in one area may create an informal market in another. For example, a country with high barriers to trade may have laws that protect its domestic market and prevent the import of foreign goods, but these barriers create incentives for smuggling and a black market for the restricted products.
Transparency is the best weapon against corruption. Openness in regulatory procedures and processes can promote equitable treatment and greater regulatory efficiency and speed.

Freedom #10: Labor Freedom
The ability of individuals to work as much as they want and wherever they want is a key component of economic freedom. By the same token, the ability of businesses to contract freely for labor and dismiss redundant workers when they are no longer needed is a vital mechanism for enhancing productivity and sustaining overall economic growth. The core principle of any market is free, voluntary exchange. That is as true in the labor market as it is in the market for goods.
State intervention generates the same problems in the labor market that it produces in any other market. Government regulations take a variety of forms, including wage controls, hiring and firing restrictions, and health and safety restrictions. In many countries, unions play an important role in regulating labor freedom and, depending on the nature of their activity, may be either a force for greater freedom or an impediment to the efficient functioning of labor markets. In general, the greater the degree of labor freedom, the lower the rate of unemployment in an economy.

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Are More Regulations the Answer?

Prospects are not looking too peachy for Democrats this election season. President Barack Obama (left) and Democrats in Congress are getting tarred by the nation's entrenched unemployment and the cost of efforts to reverse the damage. I can understand the malaise that afflicts a nation with close to 15 million people unemployed and millions more underemployed. But the blame is being put in the wrong place. The next election should be a contest over which economic worldview — laissez-faire or Keynesian — turned out to be the better one, and, on that score, the Democrats should win.

Deregulation got America into this mess — decades of it — the kind of laissez-faire economics enacted by the Chamber of Commerce, former Federal Reserve Board Chairman Alan Greenspan and Republican leaders. America barely survived life under their tie-regulators'-hands approach to markets. Wall Street sucked up the wealth in this country, hollowing out our productive sectors, while bankers got drunk on risk. It was only after $17 trillion in American household wealth was wiped out in 18 months that Greenspan acknowledged how bankrupt his views were.

– Pocono Record, Robyn Blumner

Free-Market Analysis: This opinion piece appearing in the American Pocono Record is a great representation of a certain kind of elite dominant social theme: "The marketplace is flawed and government regulatory authority is a necessary corrective, in ever-larger doses if necessary."...

Deregulation did not create the mess that America is in...

The combination of the mercantilist Federal Reserve with its debt-based money and the graduated income tax passed at the same time inflicted grievous wounds on the US Republic. Money went from gold and silver to inflatable paper currency. And what wasn't to be inflated away was eventually taxed at ever-higher rates. People went from self-sufficiency to something else. Dependent on central-bank initiated economic surges, people, even the middle and lower-middle classes, began to look for government help during the significant busts that occurred in between. In this sense, mercantilist fractional banking (essentially fiat banking) was the precursor of the welfare state.

Couple this with the Supreme Court's view that corporations are persons and various eviscerations of the Constitution that gave the federal government enormously increased powers and supported more direct voter participation and the American exception gradually subsided. America had been born a republic, but during the 20th century it in many ways began to resemble the European system that its founders had detested. What was lacking of course was a full-scale regulatory state of the kind that Germany had begun to assemble in the 19th century, aped by Britain. This lacunae began to be addressed in the 20th century as the federal congress became more and more active.

Today, of course, the United States is synonymous with regulatory enterprise and has in fact plumbed its lower depths considerably...

Much has changed in the United States. But to maintain that America needs to reregulate to regain a sound financial footing is to ignore the basis for America's initial industrial success, which was firmly rooted in the free-market. While it is true that fiat-money (regular floods of paper money) can stimulate economies inordinately, the downside of such a system lies in its inevitable economic distortion...

Every few years another boom tempts people away from solid, useful employment into something much less certain. The system encourages speculation and professional rootlessness. The system also crashes regularly, giving rise to claims that private enterprise is flawed and must be regulated. In fact, there is a symbiotic relationship between central banking and the regulatory state, with one supporting the other. It is no coincidence that regulation became far more pervasive in the 20th century, which was also an era of increased central banking.

More and more people have little idea of what it was like to live in an unregulated environment...

The idea that the US Congress, and to a lesser extent other political entities throughout the West could have taken regulatory action to ameliorate the current economic crisis is a kind of elite promotion in our view. Regulation can make things worse but we have a hard time understanding how such governmental action can make life better.

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The Economic Debate

The domestic debate, which I and many other libertarians have addressed several times in the past, involves the question of what has caused America’s economic woes.

One side — the statist side — claims that the problem lies in freedom and free enterprise.
The other side — the libertarian side — contends that our nation’s economic woes lies in the failure of the welfare-state, regulated-economy way of life that America has embraced since at least the 1930s.

The different diagnoses lead to two completely different solutions.

The statists say that since the problem is rooted in too much economic freedom and not enough regulation, the solution is to establish more government control over economic activity.

The libertarians say that since the problem is rooted in socialism and interventionism, the solution is to dismantle the welfare-state and regulatory programs (and the taxation funding them) and let genuine economic liberty reign...

What is that motivates U.S. statists to blame America’s economic woes on “freedom and free enterprise” rather than on America’s 70-year experiment with welfare-statism and regulation.

read the entire essay

Credit Crisis and Free Markets

Q. But hasn’t the current crisis discredited “free markets”?

The history of markets is one of periodic crises (especially financial crises) and recoveries, including major episodes of creative destruction, but with steady positive long run growth despite severe fluctuations around the trend. The huge fallibility of human actors makes the case for markets stronger, not weaker. The market itself triggers the corrective actions by both public and private actors when these actors do stupid things, like give too many mortgages to people who were not creditworthy and then try to cover it up with fancy securitization. The collapse of financial markets was a severe wake up call to change this stupid behavior; creative destruction is wiping out firms that made huge mistakes (despite some well-publicized cases of individual CEOs getting bonuses despite their stupid actions). New firms or restructured firms will not make the same mistakes (even if they find new mistakes to cause some new crisis). Since we recovered from all the previous crises of capitalism, it seems likely we will recover from this one. A knee-jerk rejection of markets (especially in poor countries) will likely postpone rather than accelerate the recovery.

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The Austrians Were Right

Ron Paul Addressing the House of Representatives 11/20/08

Madame Speaker, many Americans are hoping the new administration will solve the economic problems we face. That’s not likely to happen, because the economic advisors to the new President have no more understanding of how to get us out of this mess than previous administrations and Congresses understood how the crisis was brought about in the first place.

Except for a rare few, Members of Congress are unaware of Austrian Free Market economics. For the last 80 years, the legislative, judiciary and executive branches of our government have been totally influenced by Keynesian economics. If they had had any understanding of the Austrian economic explanation of the business cycle, they would have never permitted the dangerous bubbles that always lead to painful corrections.

Today, a major economic crisis is unfolding. New government programs are started daily, and future plans are being made for even more. All are based on the belief that we’re in this mess because free-market capitalism and sound money failed. The obsession is with more spending, bailouts of bad investments, more debt, and further dollar debasement. Many are saying we need an international answer to our problems with the establishment of a world central bank and a single fiat reserve currency. These suggestions are merely more of the same policies that created our mess and are doomed to fail.

At least 90% of the cause for the financial crisis can be laid at the doorstep of the Federal Reserve. It is the manipulation of credit, the money supply, and interest rates that caused the various bubbles to form. Congress added fuel to the fire by various programs and institutions like the Community Reinvestment Act, Fannie Mae and Freddie Mac, FDIC, and HUD mandates, which were all backed up by aggressive court rulings...

The Federal Reserve created our problem, yet it manages to gain even more power in the socialization of the entire financial system. The whole bailout process this past year was characterized by no oversight, no limits, no concerns, no understanding, and no common sense...

All the programs since the Depression were meant to prevent recessions and depressions. Yet all that was done was to plant the seeds of the greatest financial bubble in all history. Because of this lack of understanding, the stage is now set for massive nationalization of the financial system and quite likely the means of production.

Although it is obvious that the Keynesians were all wrong and interventionism and central economic planning don’t work, whom are we listening to for advice on getting us out of this mess? Unfortunately, it’s the Keynesians, the socialists, and big-government proponents.

Who’s being ignored? The Austrian free-market economists – the very ones who predicted not only the Great Depression, but the calamity we’re dealing with today. If the crisis was predictable and is explainable, why did no one listen? It’s because too many politicians believed that a free lunch was possible and a new economic paradigm had arrived. But we’ve heard that one before – like the philosopher’s stone that could turn lead into gold. Prosperity without work is a dream of the ages...

The policies of big-government proponents are running out of steam. Their policies have failed and will continue to fail. Merely doing more of what caused the crisis can hardly provide a solution...

There are limits. A country cannot forever depend on a central bank to keep the economy afloat and the currency functionable through constant acceleration of money supply growth. Eventually the laws of economics will overrule the politicians, the bureaucrats and the central bankers. The system will fail to respond unless the excess debt and mal-investment is liquidated. If it goes too far and the wild extravagance is not arrested, runaway inflation will result, and an entirely new currency will be required to restore growth and reasonable political stability.

The choice we face is ominous: We either accept world-wide authoritarian government holding together a flawed system, OR we restore the principles of the Constitution, limit government power, restore commodity money without a Federal Reserve system, reject world government, and promote the cause of peace by protecting liberty equally for all persons. Freedom is the answer.

read the entire speech

My thoughts: Markets work, socialism doesn't.

Economic Freedom: US #8

Economic Freedom of the World 2008 Annual Report

Lots of good charts and tables.

Index of Economic Freedom: US Results

Compiled by the Wall Street Journal and the Heritage Foundation

The economy of the United States is 80.6 percent free, according to our 2008 assessment, which makes it the world's 5th freest economy. Its overall score is 0.3 percentage point lower than last year, reflecting minor declines in four of the 10 economic freedoms.

The United States is the world's dominant economy. With over two centuries of a fundamentally free, constitutionally protected economy, America benefits from its massive scale and intrastate competition. Trade barriers among the 50 states are unconstitutional, for example, allowing for the free movement of goods and labor. However, there have been troubling developments in recent years. Property rights have been threatened by the Supreme Court's 2005 ruling in Kelo v. City of New London. Congress has been active in raising the minimum wage, which has harmed labor freedom, but inactive in lowering corporate tax rates, unlike most other advanced economies. Most alarming, America's major political parties have been unwilling to curb growing government expenditures, particularly public entitlements.

read the entire report here

Recommended Reading: An Unstimulating Idea

An Unstimulating Idea
Sheldon Richman

If we needed further demonstration of the folly that is the American political-economic system, there it is. The leaders of the interventionist state and the candidates who aspire to command it will continue to produce this inanity until people see it for the balderdash it is and resoundingly reject it.

The problem is that most people don't see it for what it is. When told economic activity is slowing down, they demand that their "leaders" and candidates assure them there is a Plan to keep them safe. The politicians are more than happy to oblige. Details don't matter much. As long as the president and the presidential aspirants adopt a somber yet hopeful and determined tone, pepper their speeches with big-sounding numbers and reassuring words, and promise to hand out money, most voters will be satisfied. They won't think about what's being said long enough to realize that none of it makes sense. They just want someone to make them feel safe, and there will be no shortage of such someones...

We are in our present position because government has burdened us with taxes, spending, debt, regulations, subsidies, guarantees (to lenders, for example), trade restrictions, fiat money, and other impositions. Between the endless domestic schemes and war, we are being crushed by the weight of the state. We don't need a stimulus. We need freedom.

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2008 Economic Freedom

Yet the evidence is piling up that neither government nor multilateral spending on education and infrastructure are key to development. To move out of poverty, countries instead need fast growth; and to get that they need to unleash the animal spirits of entrepreneurs...

The Index also reports that the freest 20% of the world's economies have twice the per capita income of those in the second quintile and five times that of the least-free 20%. In other words, freedom and prosperity are highly correlated.

The 2008 Index finds that while global economic liberty did not expand this year, it also did not contract. The average freedom score for the 157 countries ranked is nearly the same as last year, which was the second highest since the Index's inception. This is somewhat of an achievement considering the rising protectionist and anti-immigration sentiment in the U.S., the uncertainty created by spiking global energy prices, Al Gore's highly effective fear mongering about global warming, and the continuing threat of the Islamic jihad.

Today's entrepreneurs, across the globe, have similar aspirations and abilities. If only the politicians would let them be free.

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It is disturbing that only 5 countries are "economically free."

Economic Freedom of the World

The foundations of economic freedom are personal choice, voluntary exchange, and open markets. As Adam Smith, Milton Friedman, and Friedrich Hayek have stressed, freedom of exchange and market coordination provide the fuel for economic progress. Without exchange and entrepreneurial activity coordinated through markets, modern living standards would be impossible.

Potentially advantageous exchanges do not always occur. Their realization is dependent on the presence of sound money, rule of law, and security of property rights, among other factors. Economic Freedom of the World seeks to measure the consistency of the institutions and policies of various countries with voluntary exchange and the other dimensions of economic freedom.

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