Blogroll Category: Current Affairs

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Toronto bishop writes about parish precautions against the spread of the Coronavirus

Anglican Ink - Fri, 31/01/2020 - 01:37

Dear friends,

We have been watching the news with concern as information is shared about the spread of the coronavirus. Here in the Diocese of Toronto, we remember well the SARS epidemic of 2003. Even if we personally did not know anyone who had contracted that disease, their families or caregivers, we were all affected by the feelings of heightened anxiety and vulnerability in the general public.

In response to that, the Church developed some protocols around due diligence, hygiene and liturgical practices.  The “SARS Protocols” of the Diocese of Toronto are still available on our website:

While the current situation does not warrant extreme measures, it is still helpful to review them. Many of our parishioners have weakened or compromised immune systems, and it is important that they feel safe and cared for in our parishes, at all times.

I have personally consulted today with Toronto Public Health, and we will continue to heed their advice going forward. The Bishop’s Committee on Healing Ministries, chaired by the Rev. Canon Joanne Davies, Anglican chaplain at Sunnybrook Health Sciences Centre, has been reviewing our current protocols and will make revisions if it becomes necessary. We will inform you immediately if we feel we need to adapt our usual practices.

At this time, we believe our call to action is to pray – for those infected and affected, for those in the medical and scientific fields who are combatting the virus, and for all those who may feel anxious – that the Great Physician himself, Jesus Christ, will bring strength, comfort and healing to all.

The Rt. Rev. Andrew Asbil
Bishop of Toronto

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Archbishop Davies writes to Sydney parishes about the Coronavirus outbreak

Anglican Ink - Fri, 31/01/2020 - 01:35

Churches have been urged to pray about the Coronavirus outbreak and to take sensible precautions as the World Health Organisation declares a public health emergency.

Archbishop Glenn Davies has written to clergy, asking churches to pray for victims, health care workers and authorities.

“We acknowledge community concern about the incidences of infection in Australia and we express our sadness at the extent of the sickness, and especially the death, of many people affected by the disease in China,” the Archbishop wrote. “We encourage prayer for those affected families and for governments and health care workers seeking to address and constrain the outbreak, both in China as well as in Australia.”
 
“Many of our churches have Chinese members, who are experiencing a heightened sense of anxiety for their relatives in China, as well as the growing number of cases occurring in Australia.” Dr Davies said.
 
“While we should not be alarmed, as the number of confirmed cases of the coronavirus in NSW is low, we should also be aware of the dangers that the virus presents and take any necessary precautions for the safety of our congregations. I encourage you to pray for those who have been infected, for our Commonwealth and State governments as they address this crisis, and for the health and safety of our own communities.”
 
NSW Health has a website with all relevant information here. For further advice, you can also call the Health Direct helpline: 1800 022 222

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Archbishops apologize for Church of England’s sexual ethics guidelines

Anglican Ink - Fri, 31/01/2020 - 01:32

We as Archbishops, alongside the bishops of the Church of England, apologise and take responsibility for releasing a statement last week which we acknowledge has jeopardised trust. We are very sorry and recognise the division and hurt this has caused.

At our meeting of the College of Bishops of the Church of England this week we continued our commitment to the Living in Love and Faith project which is about questions of human identity, sexuality and marriage. This process is intended to help us all to build bridges that will enable the difficult conversations that are necessary as, together, we discern the way forward for the Church of England.

The Most Rev Justin Welby, Archbishop of Canterbury

The Most Rev John Sentamu, Archbishop of York

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The State Is a Predator. It Can't Be Used to Achieve Libertarian Ends

Mises Institute - Thu, 30/01/2020 - 20:00

Tyler Cowen, who is said to be “known as one of the libertarian world’s deepest thinkers,” recently wrote a blog post entitled “What Libertarianism Has Become and Will Become — State Capacity Libertarianism.” There, Cowen asserts that libertarianism “is now pretty much hollowed out,” because it has not been able to address an idiosyncratic list of problems ranging from climate change to improving K-12 education. Consequently, according to Cowen, “smart” classical liberals and libertarians “have evolved into a view, as if guided by an invisible hand.” This view Cowen dubs “State Capacity Libertarianism.“ (This name appears in bold font in the original post, seemingly belying Cowen’s claim that it is intended as an “entirely non-sticky name.”) According to Cowen those libertarians inexplicably passed over by the invisible hand of ideological enlightenment have drifted off into “Ron Paul-ism and less savory alt right directions.”

Cowen’s doctrine of State Capacity Libertarianism comprises eleven tenets encapsulated in a total of 719 words and, absent further elaboration, is surpassingly silly. The tenets are a hodgepodge of mundane facts, casual observations lacking supporting facts, and explicit or implicit value judgments postulated without argument. What State Capacity Libertarianism seems to boil down to in practice is the old-fashioned “mixed economy” as described by Paul Samuelson in a 1950s edition of his famous economics principles textbook. This is mixed with a heavy dose of nineteenth-century gunboat diplomacy to maintain the postwar Pax Americana, “extend capitalism and markets,” and “keep China at bay abroad.” Given Cowen’s prodigious intellectual reputation, this piece to me seems muddled and insubstantial and hardly warrants further discussion. (Jeff Deist has also provided a clear and concise refutation of Cowen’s main points.)

Cowen’s post, however, was clearly designed to provoke and boy, did it, with libertarians from every corner and outpost of the official movement and its borderlands weighing in (here, here, here, here, here, and here). Now these responses are very much worth discussing because they confirm Cowen’s contention that mainstream libertarianism has been “hollowed out”—although hardly in the sense that he intended. Let me offer just two examples, from individuals I greatly admire and respect as scholars, economists, and dedicated libertarians.

David Henderson, a research fellow at the Hoover Institution, entitles his response “The Meaning of Libertarianism.” The title promises at least a brief elucidation of what in Henderson’s view are the core doctrines of libertarianism. Unfortunately, this is not forthcoming. Instead Henderson begins by embracing Cowen’s distinction between “smart libertarians” and unnamed others, presumably the dummies and the “unsavory.” However, contrary to Cowen, Henderson identifies smart libertarians with a few mainstream libertarian institutions. These comprise “three main organizations,” namely the Reason Foundation, the Cato Institute, and the Mercatus Center affiliated with George Mason University. Ironically, the director of the Mercatus Center is none other than Tyler Cowen. It is not surprising, therefore, that for Henderson libertarianism means efficient solutions to economic and social problems promulgated by policy analysts at selected think tanks.

The bulk of Henderson’s article is thus confined to citations of research and anecdotes indicating how the free market and entrepreneurship would solve or alleviate the problems raised by Cowen, including traffic congestion, low-quality K-12 education, and climate change. Near the end of his article Henderson rehearses the venerable public choice argument demonstrating that the perverse incentive structure confronting politicians, bureaucrats, and voters in the political arena produces the inefficient outcomes that Cowen bemoans. This contrasts with the alignment of incentives guiding and coordinating the actions of consumers and producers in the market economy, which would conduce to a more efficient resolution of most of these problems.

Henderson does score cogent points against Cowen. But, in the end, Henderson’s version of libertarianism amounts to little more than economism, the narrow and hollow doctrine of enlisting market forces to improve social efficiency under the existing political regime. Henderson’s economistic approach to libertarianism is epitomized in Milton Friedman’s classic work Capitalism and Freedom.

Richard Ebeling, the prolific and prominent Austrian economist and libertarian, attempts to engage Cowen on a broader philosophical level than Henderson does. In his article, Ebeling extolls and warns against losing sight of the “classical liberal ideal.” This is all well and good, and like Henderson, Ebeling lands some telling blows against Cowen’s eccentric political credo. Ebeling’s critique is especially effective in demonstrating that government intervention leads to a distortion of economic calculation and the irrational allocation of scarce resources. But the reader looks in vain for a solid and inspiring statement of the classical liberal ideal.

In the end, Ebeling does not seem able to completely free himself from the economistic approach to libertarianism, lamenting “how difficult the logic of the ‘economic way of thinking’ can be for so many to, at first, grasp and understand.” As if learning economics by itself—even sound Austrian economics—will cause the scales to fall from the eyes of the deceived and subjugated masses and allow them to suddenly see the true nature of the state as a criminal enterprise and the great and immediate enemy of human freedom.

More generally, Cowen’s State Capacity Libertarianism harkens back to an older tradition that frankly places the state beyond and above society. In this view, the state is a nonmarginal actor whose task is to achieve certain collective outcomes intuited by Cowen or some other political philosopher. In order to achieve its ordained goals, however, the state must possess two things: 1. sufficient legal capacity to enforce its laws and regulations throughout the territory over which it exercises a monopoly of violence; and 2. sufficient legal fiscal capacity to extract from its subjects the needed resources, the quantity of which are rigidly fixed by its duties. Chief among these duties, according to Cowen, is “the maintenance and extension of capitalism” to promote economic growth. Additionally, the state needs to be “strong” and “centralized,” although not necessarily large in size or scope, to discharge its responsibilities. Hence, state capacity libertarianism.

In their response to Cowen, Henderson and Ebeling correctly point out that the state is an economic actor whose accretions of legal and fiscal capacity indeed involve opportunity costs and whose benefits are beyond calculation because they are not subject to the profit and loss test of the market. Thus, when the state pursues goals beyond providing public goods and a secure legal and enforcement framework for voluntary production and exchange, it inevitably distorts economic activity. Unfortunately In their eagerness to rebut Cowen, Henderson and Ebeling fail to recognize the germ of truth in Cowen’s conception of the state as wholly separate from society. In portraying the state as an integral part of economy and society they ignore its unique political, i.e., predatory, nature. Libertarianism becomes in their hands a recipe for constraining state action in the interest of optimizing social efficiency. This economistic, hollowed-out version of libertarianism may be called “state efficiency libertarianism.”

In contrast, hard-core, muscular libertarianism begins with the insight that the state is fundamentally different in nature from society and economy, and stands wholly apart from them. The main premise of state predation libertarianism, as we may call it, was expressed quite trenchantly by the men and women of the American Old Right, such as H. L. Mencken, Albert J. Nock, Frank Chodorov, Isabel Patterson, and Rose Wilder Lane, whose most eminent intellectual descendant was Murray Rothbard. From them came no talk of growing the state to adequate “capacity” or directing it on a path to social efficiency. For them the hallmarks of the state were its predatory nature and its existence apart from society. Let us conclude with two passages from Old Right authors along these lines.

Albert Jay Nock vividly exposed the predatory nature of the state in his brilliant article “The Criminality of the State”:

the State's criminality is nothing new and nothing to be wondered at. It began when the first predatory group of men clustered together and formed the State, and it will continue as long as the State exists in the world, because the State is fundamentally an anti-social institution, fundamentally criminal. The idea that the State originated to serve any kind of social purpose is completely unhistorical. It originated in conquest and confiscation—that is to say, in crime….No State known to history originated in any other manner, or for any other purpose. Like all predatory or parasitic institutions, its first instinct is that of self-preservation. All its enterprises are directed first towards preserving its own life, and, second, towards increasing its own power and enlarging the scope of its own activity. For the sake of this it will, and regularly does, commit any crime which circumstances make expedient.

In his classic book The Rise and Fall of Society (pp. xix–xxi), Frank Chodorov emphasized how prior to the twentieth century most political philosophers and the general public correctly recognized the utter apartness and “otherness” of the state with respect to society:

In times past, the disposition was to look upon the State as something one had to reckon with, but as a complete outsider. One got along with the State as best one could, feared or admired it, hoped to be taken in by it and to enjoy its perquisites, or held it at arm's length as an untouchable thing; one hardly thought of the State as the integral of Society. One had to support the State—there was no way of avoiding taxes—and one tolerated its interventions as interventions, not as the warp and woof of life. And the State itself was proud of its position apart from, and above, Society. The present disposition is to liquidate any distinction between State and Society, conceptually or institutionally….The idea that this power apparatus is indeed the enemy of Society, that the interests of these institutions are in opposition, is simply unthinkable….[U]ntil the modern era, it was an axiom that the State bears constant watching, that pernicious proclivities are built into it.

Categories: Current Affairs

We're not impressed by this from Angus Deaton

Adam Smith Institute - Thu, 30/01/2020 - 19:01

Yes, yes, we know, think tankers arguing with a Nobel Laureate - but cats may look at Kings all the same.

This does not impress:

Many economists, especially on the right, argue that inequality is nothing to worry about. Why? Look at the Gini coefficient, they say. While it is true that this headline inequality measure rose quite quickly in Britain when Margaret Thatcher was prime minister, it has actually been pretty flat or even falling for 30 years. The US, they acknowledge, is a good deal more unequal than Britain, but even there the Gini has hardly moved since the financial crisis, and so—these economists say—it can hardly be blamed for the arrival of President Trump.

All of that is true. And so there is the insistence that we should look at other methods of measuring inequality. Which does, to us, smack rather a little too much of the numbers don’t show what is convenient for the argument so let’s use some others.

This is worse:

It is flexible, too. It can be applied not only to income—about 0.35 for Britain, and about 0.47 for the US

The British number is the post tax and post benefits number. The American the pre-, for the US number is usually calculated before the effect of the tax system and before the vast majority of the welfare - including only direct cash transfers, not goods and services in kind or via said tax system. Which is how most American poverty and income inequality is alleviated, through the tax system and in kind.

Perhaps inequality is the great problem of our times, possibly it should even be measured by another number than the Gini. But we do think we’d all be aided by very senior economists indeed at least using righteously comparable numbers. Which isn’t what is being done here.

Tsk.

Categories: Current Affairs

Tale of Two Economies

Adam Smith Institute - Thu, 30/01/2020 - 17:01

In the 1950s the two states of Cuba and Hong Kong were largely similar. They both had a GDP per capita of roughly $4,500 in today's money.

Today the picture is quite different. For every thousand people in Cuba just 30 have a  computer, but in Hong Kong there will be 600 for every 1000 residents. Hong Kong has an average salary of $26,000 compared to $400 in Cuba. Yes, you read that right. Cuba is a country where doctors earn salaries of $600 a year. The two countries started from the same low base and through their experiences of communism and capitalism have diverged to such a stark degree. 

Only on a few measurements do the two appear close. Life expectancy is surprisingly high in Cuba at 79.74 years (it's still higher at 84.23 in Hong Kong). Indeed Cuba's healthcare is one of the few items still singled out in adoration by Western Commies. However, that may be down to Cuba spending 10% of GDP on healthcare compared to 2% for Hong Kong (only paying your doctors $600 a year also probably helps — not to mention pocketing the cash that foreign governments pay when the doctors are sent overseas). 

Neil Monnery's book A Tale of Two Economies gives an interesting account of the two men responsible for the construction of the two starkly different systems: Che Guevara and Sir John Cowperthwaite. Guevara after helping Castro into power also helped to construct Cuba's communist economic system and held key posts in government. The less well known Cowperthwaite served in a number of posts in the British administration of Hong Kong including over a decade as financial secretary. He pursued non-interventionism in the country and free market principles which have helped deliver remarkable prosperity to the territory, an approach that was worlds away from Guevara’s centralised technocratic system. 

The history provides evidence of a fairly good experiment of two countries at similar stages of development which, taking two different models, have resulted in two incredibly different outcomes. A similar story can obviously also be found with East and West Germany. No matter how well intentioned and high the principle employed, it has been regularly demonstrated which is the better of the two systems.

Importantly however, Monnery distinguishes about the type of capitalism. Crony capitalism can be just as much a hindrance as Communism. It was crony capitalism which the Cubans rejected in their revolution in the late 1950s. It is also one that still racks many developing nations — and even to a lesser extent the developed ones too from time to time.

With the recent preferential treatment of Flybe, this is evidently an important nuance that still seems to be relevant. Seeing that Flybe has been in trouble for years it is worth remembering the remarks of Cowperthwaite’s successor, Sir John Haddon-Cave when describing their policy of positive non-intervention

 ‘that it is normally futile and damaging to the growth rate of an economy, particularly an open economy, for the government to attempt to plan the allocation of resources to the private sector and to frustrate the operation of market forces.’ 

To forget the lessons of Cuba and Hong Kong is to forget the risks and consequences of crony capitalism - but more importantly, it is to forget the costs of socialism. 

Categories: Current Affairs

Why Democracy Doesn't Give Us What We Want

Mises Institute - Thu, 30/01/2020 - 17:00

That Americans are in the throes of a crisis in democracy has become a commonplace refrain of late. I have noticed that almost all such commentary treats political democracy, implicitly or explicitly, as the ideal. Yet in truth it is a seriously flawed ideal. In fact, as F. A. Hayek noted years ago,

all the inherited limitations on government power are breaking down before…unlimited democracy…the problem today.

Perhaps the most blatant evidence against the idea that moving toward more democracy is always an improvement is the frequency with which policies and candidates claiming majority support advance coercive measures that take from some to give to others. That is robbery, which violates universal moral and ethical principles, making it less than an ideal.

There are, in fact, several ways that political democracy comes up short as an ideal. An ideal would avoid violating individuals' established rights. It would be responsive; people's choices would have to matter. It would give people incentives to become well informed and think carefully about policies. It would require powerful incentives to deter dishonesty and misrepresentation. It would have to be limited in scope, as no one wants every choice about their lives subject to majority determination.

It is hard to think of government policies that do not violate some people's rights. Such violations are, in fact, often the main drivers of policy (e.g., price controls), even though they violate the central function of a government advancing its citizens' well-being—defending existing rights.

In contrast to reams of democracy-extolling rhetoric, the fact is that virtually no one’s vote changes the results at the ballot box. Just ask yourself if you can name an exception. Consequently, "democratic" results are not responsive to individuals' preferences.

Further, voters typically face binary votes on "electable" candidates who represent bundles of policies and promises, some of which the vast majority of even those who voted for them object to. That is a long way from giving voters power to effectively exercise their desires. The least harmful option, not the most preferred, is frequently chosen.

Most voters also face very limited incentives to think carefully about policies, illustrated by the vast number who don't even know their political representatives' names. That is largely because unlike individuals' market votes with their dollars, which change their outcomes—better matching their circumstances and preferences—public policy voting does not.

Politics also imposes fewer effective constraints on dishonesty and misrepresentation than market arrangements do. Beyond greater "customer" ignorance, politics has no truth-in-advertising laws, money-back guarantees, or effective warrantees. Politicians' wares are not easily evaluated, since they are (hopefully) plausible-sounding stories about candidates' intentions, which they cannot accomplish alone, backed by the every-ready escape-hatch excuse that failures to deliver on what was promised represent the best deal that was actually possible. There is also typically no more than one "electable" competitor to keep candidates honest, and that is frequently limited only to election season.

In a political democracy, a majority can also force its preferences on others in any issue. That is why our founders adopted constraints on majority abuse, such as limited, delegated powers and the Bill of Rights. However, those constraints have largely been undermined.

In contrast to political democracy, free market capitalism, which reflects democratic self-government, represents a far better ideal.

Its system of exclusively voluntary cooperation based on self-ownership requires that property rights be respected; no majority can violate owners' rights. Individuals' dollar votes change their outcomes, even when their preferences are not the majority’s preferences, making them far better informed than they are about politics. There also are more mechanisms providing honesty and accountability.

Holding democracy out as an ideal overlooks the question of whether market democracy or political democracy better serves citizens. And if that is the end in view, a superior form of democracy is to remove virtually all decisions and policies that we need not share in common (almost all of them, beyond the mutual protection of our property rights) from government dictation, even if they are "democratic," and let people exercise self-government through their own voluntary arrangements, protected by their inalienable rights.

Categories: Current Affairs

Genocide warning for Nigeria

Anglican Ink - Thu, 30/01/2020 - 16:42

Today, Christian Solidarity International (CSI), an NGO campaigning for religious freedom, issued a Genocide Warning for Nigeria, and called on the Permanent Member of the United Nations Security Council to take appropriate action to prevent genocide in Africa’s largest country. 

CSI issued this Genocide Warning in response to a rising tide of violence directed against Nigerian Christians and others classified as “infidels” by Islamist militants in the country’s north and middle belt regions. 

1,000 Christians in Nigeria are reported to have been killed by Islamist militias over the past year, with 6,000 murdered since 2015, according to the most conservative estimates from Nigerian Christian sources. In the past five weeks alone:

  • The Islamic State West African Province (ISWAP) released a video showing the murder of Ropvil Daciya Dalep, a Christian student at the University of Maiduguri (Jan 23).
  • Rev Dennis Bagauri was shot to death at his home in Adamawa state (Jan 20).
  • Fulani militants attacked 11 Christian villages in southern Kaduna state and Plateau state, killing 50 and kidnapping 58 (Jan. 6-13).  
  • Boko Haram terrorists beheaded Martha Bulus and her two bridesmaids as they were en route to her wedding in Borno State (Dec. 26). 
  • ISWAP released a video showing 11 Christians being beheaded, in what the Islamic State claims was revenge for the killing of their “caliph,” Abu Bakr al-Baghdadi (Dec 26).

“Christians have become an endangered species in their own country,” warned CAN’s President, Dr. Samson Ayokunle on 23 January. “Nigeria”, he continued, “is under a siege orchestrated by the murderous bloodthirsty and criminally-minded Boko Haram terrorists, Fulani terrorist herdsmen, bandits and kidnappers.” Ayokunle called the government to account for its inaction in the face of the escalating conflict and the culture of impunity in Nigeria.[1]

Cause for grave concern has also been raised by the International Criminal Court’s Office of the Prosecutor. In a report published at the end of 2019, the Office of the Prosecutor warned that there is “reasonable basis” to believe that war crimes and crimes against humanity have taken place in Nigeria. The ICC report stated that not only Boko Haram and its Islamist offshoots are under investigation, but also the Nigerian Security Forces (NSF). According to the ICC, the investigation of NSF includes acts of violence against persons associated with the Shiite “Islamic Movement of Nigeria” and the predominately-Christian Indigenous People of Biafra.[2]

“The conditions for genocide exist in Nigeria,” said Dr. John Eibner, the Chairman of CSI’s International Management, “with Christians, non-violent Muslims, and adherents of tribal religions being particularly vulnerable. The increasingly violent attacks and the failure of the Nigerian government to prevent them and punish the perpetrators are alarming”. 

Eibner continued: “The vast majority of states, as signatories to the Genocide Convention of 1948, have committed to ‘undertake to prevent’ genocide, a commitment that was reaffirmed in the 2005 declaration of the Responsibility to Protect. CSI therefore calls on the permanent members of the UN Security Council to take swift action to uphold this commitment to genocide prevention in Nigeria.”

Eibner also called on Christian leaders in Europe, North America, and around the world to promote and uphold CAN’s appeal for three days of global fasting and prayer for Nigeria from 31 January to 2 February. 

CSI has been monitoring the surge in sectarian violence in Nigeria, and last year set up the Nigeria Report website – www.nigeria-report.org – to provide news and a platform for discussion about ways to end the interwoven sectarian conflicts and tribal rivalries that have so gravely destabilized Africa’s most populous county. 

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CoE report credits New Wine for keeping kids in church

Anglican Ink - Thu, 30/01/2020 - 16:39

In his recent report to the General Synod, the Church of England’s Youth Evangelism Officer, Jimmy Dale, outlines the results of an 18 month analysis of church engagement with under-16s. Of those churches reporting 100 or more under 16 year-olds, a remarkable 32% were affiliated to the New Wine network and 30% of those reporting 51-100 under-16s would associate themselves with New Wine.

The report examines trends in under-16 church engagement with a wide range of influence, including the impact of youth and family workers, congregation size, location and tradition, as well as more general trends in growth and decline. In the category of tradition, it is noteworthy how significant a part New Wine plays in engaging children and young people. Responding churches affiliated to the New Wine network report the highest engagement with under 16 year-olds from any single group, with only ‘central Church’ – parishes which are doing traditional parish ministry and representing a significantly larger proportion of respondents – reporting higher engagement overall.

Paul Harcourt, New Wine National Leader, commented: “The report shows the extent of the challenge facing the Church in reaching children and young people, but, for the first time, it also identifies where the ones that we do have are being nurtured.  As the report clearly states, we must not become complacent because the overall trends for under-16 engagement are concerning, but we will absolutely continue to teach and encourage with the New Wine DNA of the Word and ministry in the power of the Spirit. We know also that we need to go further and are looking at various ways of investing more into local churches as they reach children and young people.”

Rick Otto, Head of New Wine Kids’ Ministry, remarked: “Our kids teams are sensational and we are blown away every year by how many of the kids in our children’s groups come to know Jesus by the power of the Spirit. Our kids leader training throughout the year equips leaders to live by the power of God’s Word and the Spirit, so that kids can see and experience the power of the gospel for their generation.”

Lee Kirkby, Head of New Wine Luminosity (youth), also commented: “Luminosity inherits youth who have experienced incredible teaching from the New Wine kids teams and we also meet young people who have never known any kind of faith and are hearing about Jesus for the first time. In many ways, this report is encouraging and a confirmation that we are following God’s call for us, but we know the crisis facing the Church today in reaching young people and we’re committed to playing our part in the advance of God’s Kingdom for his glory and for all generations.”

The full report can be found here.

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Letter from Sydney: Prayers in the aftermath of the bush fires

Anglican Ink - Thu, 30/01/2020 - 16:30

Thank you to those who have asked about how you can be praying for Australia. Although we have bushfires (wildfires) most summers, this year the scope of them has been enormous. It is hard to fathom how much land has been scorched. Thankfully the human death toll has been reasonably low compared to previous years – perhaps past experience has taught us some lessons about the danger of fires. But of course any loss of life is devastating to the families, friends and communities, and all the more poignantly when it is the death of volunteer firefighters. Many homes have been lost, and businesses will struggle in some of the regions, especially those regions which rely heavily on tourism.

Although the bush will slowly regenerate over the months and years ahead, the huge loss of fauna is distressing. We still need lots more rain, not just for the fires (which are ongoing), but for lifting drought conditions across much of the country.

So please pray for rain; pray for those who have suffered significant loss and trauma; pray that those still fighting fires will have strength and be safe; pray that the financial aid will be wisely distributed; and pray that churches will be a beacon of gospel hope in their communities.

Also, please bear in mind that terrible floods have occurred recently in Jakarta, Indonesia, which have caused more loss of life and resulted in more displaced people. Do also pray for those people and the relief effort there, which, at least in our part of the world, has had almost no media coverage.

Yours in Christ,

~ Ian Carmichael, Matthias Media, Sydney

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Truro parish update on departure of Tory Baucum as rector

Anglican Ink - Thu, 30/01/2020 - 16:29

A Statement to the Congregation – January 24, 2020

The Truro vestry wishes you grace and peace from God our Father and the Lord Jesus Christ.

We write to clarify and update the previous statements concerning the status of the Rev. Tory Baucum.

Tory remains an employee of Truro and is working with the wardens to determine his final day as an employee. Pending Tory’s departure, Tim Mayfield is Acting Rector.

The third-party review of the staff’s disputes is proceeding. Tory has affirmed his intention to cooperate with the third party and his desire for reconciliation.

Later, the Vestry will inform the congregation of the results, as well as Tory and Elizabeth’s agreed-upon departure date.

Please hold Truro and our members, staff, clergy, and vestry in prayer as we continue to seek the Lord’s guidance for our future.

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<em>The Age of Entitlement</em>: The Legacy of Anti-Discrimination Laws

Mises Institute - Thu, 30/01/2020 - 12:00

[The Age of Entitlement: America Since the Sixties. By Christopher Caldwell Simon & Schuster, 2020, 342 pages.]

Christopher Caldwell has written an outstanding book, although it will win him few friends in the elite journals such as the New York Times for which he often writes. He addresses a question that many have asked: why did Donald Trump, in a shock to mainstream opinion, win the Republican nomination for president in 2016 and, even more of a shock, go on to win the election?

The standard response is that enough of those Hillary Clinton called the “deplorables” turned in rage against the liberal establishment to swing first the nomination and then the election to the populist Trump. With that answer Caldwell agrees, but what are the roots of this rage? Caldwell’s analysis of this phenomenon is deep and surprising.

He traces it to the civil rights legislation of the 1960s. By forbidding private discrimination on grounds of race, the Civil Rights Act of 1964 took the first step toward the destruction of what Caldwell calls the “old constitution” by which America had been governed. As he puts it,

The changes of the 1960s, with civil rights as their core, were not just a major new element in the Constitution. They were a rival constitution, with which the original one was frequently incompatible—and the incompatibility would worsen as the civil rights regime was built out. (p. 6)

Caldwell must confront an objection. Weren’t blacks oppressed under the old system? Shouldn’t we recognize that the new legislation was needed to remedy injustice? Caldwell acknowledges that most people outside the South opposed the state-mandated segregation that prevailed there. But, and this is his crucial point, majority opinion among whites went no further. Most of them thought their own relations with blacks were fine:

Most Americans, liberal as well as conservative, saw the race problem as something distant. It had to do only, or mainly, with the exotic culture of the South, where segregation was legal….As white people in the northern and western states saw it, racial harmony had arrived long ago….As a practical matter, whites did not suspect they would see the vast increase in federal government oversight that would become the sine qua non of civil rights. (pp. 31–32)

Blacks did not view the situation in this way:

Victims see racial discrimination as a system of corruption that burdens them in a variety of practical, measurable ways—with "lack of jobs, lack of money, lack of housing." They are unlikely to view the system as repaired until those practical burdens are removed. (p. 24)

Caldwell does not condemn them for this. In fact, in thinking that ending legal discrimination would not suffice for racial harmony, they were correct. His point is a different one. Whites never "signed on" to the radically disruptive measures that blacks and government elites wanted.

Governments could now disrupt and steer interactions that had been considered the private affairs of private citizens—their roles as businessmen or landlords or members of college admission boards….[T]he government was now authorized to act against racism even if there was no evidence of any racist intent. This was an opening to arbitrary power. And once arbitrary power is conferred, it matters little what it was conferred for. (p. 33)

Other groups of the disaffected, including feminists and homosexuals, followed the path laid down by blacks. They too demanded that the government reconstruct social institutions to remove discrimination against them. Caldwell by no means denies that these groups had genuine grievances. He aims instead to stress the upheaval in the legal order that was required to satisfy these grievances, an upheaval that greatly enhanced the arbitrary power of the federal government. For example, he says of the movement for "same-sex" marriage:

It was clear that gay marriage did carry a threat, because…it overturned the understanding that marriage was something antecedent to government. On that antecedence rested the inviolability of marriages and families, the convention that what they did, how they built their little micro-community of love, was none of the government’s business. Overturning this understanding did not immediately damage any heterosexual marriages. But it diminished and threatened marriage as an institution. (pp. 121–22)

It did so by leaving it to the federal government to define marriage and parental rights.

Someone might object to Caldwell along these lines. "It is true that under the new dispensation, old rights have been curtailed. People cannot use their right of freedom of association to discriminate against 'protected' groups, nor does their right of free speech override the 'political correctness' that dominates universities. But this does not give us good reason to return to the past. We need to ask, what really are the rights that people have?"

Caldwell’s answer to this objection is not altogether satisfactory. He seems to say that questions of right and wrong cannot be settled objectively:

These are matters of perspective. There is no point in describing one interpretation as morally "right" or "wrong." (p. 25)

Instead, Caldwell largely confines himself to alerting us to what has been given up. Besides restrictions on freedom of association and speech, people no longer live in a stable constitutional order. No fixed principles of constitutional interpretation limit the federal government. Further, aggrieved groups act undemocratically in seeking to alter customary ways of doing things.

Caldwell is right to stress the costs of what has been given up, but a convincing reply to those who think the price worth paying must appeal to the moral truth of the matter. To deny that moral truth is accessible to us is itself a moral position that needs to be supported by argument. I do not doubt that Caldwell would have valuable things to say, were he to give us his own account of morality, but he does not do so here. This weakens the normative weight of what he says, though it leaves intact his descriptive account of the populist backlash against the new constitutional order that led to Trump’s victory. A correct account of the scope and limits of freedom of association would to my mind largely vindicate his understanding of the matter. Caldwell’s emphasis on freedom of association merits our applause, but one wonders what happened to this right when Caldwell bemoans the fate of American workers who have lost their jobs through "outsourcing." If workers are free to accept or reject an offer of employment, why are not employers equally free to make or refuse such an offer?

The book is filled with insights, and I shall end with one that is especially valuable. Caldwell notes that the spread of the elitist anti-discrimination system throughout the world has become a dominant motif of American foreign policy.

The task that civil rights laws were meant to carry out—the top-down management of various ethnic, regional, and social groups—had always been the main task of empires. At the turn of the twenty-first century, the real place of the Vietnam War in the history of American diplomacy became much clearer….[I]t had merely been one of the less successful of the experiments in global "governance"that the United States was doomed by its imperial position to make. It laid the groundwork for the "humanitarian invasions" of the 1990s and beyond. (pp. 161–62)

Caldwell has braved the perils of conformity, and his outstanding intelligence in doing so matches his courage.

Categories: Current Affairs

The Theory and Brief History of Money and Banking

Mises Institute - Wed, 29/01/2020 - 20:00

[This article is part of the Understanding Money Mechanics series, by Robert P. Murphy. The series will be published as a book in late 2020.]

The ultimate purpose of this booklet is to give the reader a solid grasp of how money works in today’s world. Yet before diving into the particulars of central banks, repo markets, and LIBOR—all topics that will be covered in future chapters—we should first provide a general framework giving the basic theory or “economic logic” of money and banking.

In short: why do we have money in the first place? Where does it come from, and what determines its form (livestock, metal ingots, coins, paper notes, electronic ledger entries, etc.)? What qualities make for a good money? What role do banks play—is it something other than what money itself does for us?

In this chapter, we’ll answer these elementary yet essential questions. To be clear, we are not here offering an actual history lesson, though we do mention some important historical episodes and illustrative examples. Rather we are providing a mental framework for understanding everything else that follows in the booklet.

The Limits of Direct Exchange

To understand the importance of money, let’s first imagine a society without money. In a world limited to barter, or what economists more precisely call direct exchange, there would still be private property and people would still benefit from voluntary trade. Because economic value is subjective—the “utility” of a good is in the eye (or mind) of the beholder—we can have win-win exchanges, in which both parties walk away correctly believing that they got the better end of the deal.

However, if society were limited to direct exchange—in which individuals only accept items in trade that they plan on using personally—then people would miss out on many advantageous transactions. Let’s consider a simplistic example. Suppose there are three individuals: a farmer, a butcher, and a cobbler. The farmer starts out with some eggs that he’s just taken from his hens. He would like to trade his eggs in order to get his tattered shoes repaired. The problem, though, is that the cobbler doesn’t want any eggs—but he would be willing to repair the shoes for bacon.

Unfortunately, the farmer doesn’t currently have bacon. However, his neighbor the butcher does have bacon. Yet the butcher doesn’t want to trade with the cobbler, because the butcher’s shoes are just fine. What the butcher would really like are some eggs. Yet, the farmer himself doesn’t like the taste of bacon, and would rather eat his own eggs.

In a world limited to direct exchange, these men are at an impasse, because no single transaction would benefit any pair of them. Yet all of them could improve their situation with a rearrangement of the goods.

The solution is to introduce indirect exchange, in which at least one person accepts an item in trade that he doesn’t plan on using himself but holds merely to trade away again in the future. In our example, suppose that the farmer has an epiphany: Even though he personally dislikes its taste, he trades his eggs to the butcher to obtain the bacon. Then he takes the bacon to the cobbler, who accepts it as payment for fixing his tattered shoes.

direct exchange diagram

After these two trades, all three individuals are better off than they were originally. Remember, though, that the solution relied on the farmer accepting an item in trade—in this case the bacon—that he didn’t plan on using himself. Economists call such a good a medium of exchange. Just as air is a “medium” through which sound waves travel, the bacon served as a medium through which the farmer’s ultimate exchange was effected—namely giving up his eggs in order to receive shoe-repair services.

Media of Exchange and the Origin of Money

As our fable illustrated, individuals can often improve their position by trading away goods that are less marketable and accepting goods that are more marketable, even if they don’t personally plan on using the items. As the founder of the Austrian school, Carl Menger, demonstrated in an 1892 essay1 (though earlier economists had anticipated some of the explanation), this principle is all we need to explain the emergence of money.

As individuals in the community seek to trade away their less marketable (or less liquid) goods in exchange for more marketable (or more liquid) goods, a snowball process is set in motion: those goods that started out with a wide appeal based on their intrinsic qualities see a boost in their popularity simply because they are so popular. (For a more modern example, the prisoners in a World War II POW camp would gladly trade away their rations in exchange for cigarettes even if they were nonsmokers, because enough of the other prisoners were smokers.2) Eventually, one or two commodities become so popular that just about everyone in the community would be willing to accept them in trade. At that point, money has been born.

A formal definition for money is that it’s a universally accepted medium of exchange. Menger’s explanation showed how such a commodity could emerge from its peers merely through voluntary transactions and without any individual seeing the big picture or trying to “invent” money. (See the endnotes for recent anthropological criticism of Mengerian-type explanations of the origin of money.3)

The Qualities of a Good (Commodity) Money

Money that emerged in the process we’ve described would necessarily be commodity money, in which the monetary good itself is also a regular commodity. (In chapter 3 we will discuss fiat money, in which the monetary good serves no other function than to be the money.) Historically, many types of commodities have served as money in various regions, including livestock, shells, tobacco, and of course the precious metals gold and silver.

What would make a community gravitate towards some commodities but not others? Besides having a wide marketability, an individual would want a medium of exchange to possess the following qualities: ease of transport, durability, divisibility, homogeneity, and convenient size and weight for the intended transactions.

In our fable above, although bacon served as the medium of exchange, it would be ill-suited to serve this purpose generally, as bacon is perishable. Likewise, a shotgun might be very valuable in certain communities, but it’s not divisible; you can’t cut it in half to “make change.” Diamonds might seem like a great candidate for a medium of exchange, but they aren’t homogeneous: one giant diamond is more valuable than five smaller diamonds that (combined) weigh the same amount.

These types of considerations help explain why eventually gold and silver emerged as the market’s commodity monies of choice. These precious metals satisfied all of the criteria of what makes a convenient medium of exchange, and once the community generally agreed, they were money.

Monetary Calculation

The emergence of money meant that a single commodity was on one side of every transaction. This greatly reduced the calculations required to navigate the marketplace. For example, consider a merchant whose business required him to closely follow twenty different goods. In a world of pure barter—where each good traded directly against every other good—in principle he would have to keep track of 190 separate barter “prices”4 (meaning the ratios at which one good traded for another). But if one of those twenty goods also serves as the monetary good—maybe it’s silver—then the merchant only needs to keep track of nineteen different prices (all quoted in silver), because each of the other goods is always being bought and sold against silver.

Moving from a state of barter to a monetary economy allows for economic decisions to be appraised in terms of a standard unit. With the use of money, business owners can engage in accounting, where they can easily calculate whether they had a profitable year. Trying to compare revenues to expenses would be much more difficult in a pure barter system. A factory owner could know that her operation used up certain quantities of hundreds of input commodities (including labor hours), in order to produce certain quantities of dozens of outputs, but without being able to reckon these physically distinct commodities in terms of money prices, she would face the same type of problem plaguing socialist central planners.5

The Function of Monetary Coins (and Tokens)

We have seen how a commodity money can emerge spontaneously from a prior state of barter, facilitating exchanges and profit/loss calculations. However, even though a community benefits tremendously from the existence of money, there would still be limitations if the money remained in its “raw” form. It would hamper trade if shopkeepers had to perform metallurgical tests on hunks of metal that customers presented for payment to verify that the hunks were indeed silver (or gold, etc.) of the claimed weight.

The solution to this problem is to coin the raw hunks of metal into recognizable disks of a uniform size and purity (or “fineness”). We should emphasize that a full-bodied coin was not money because of the stamping process; the markings on the coin merely indicated to the community that the hunk of metal in question did indeed contain the specified weight in the underlying commodity that served as money.

In addition to striking full-bodied coins, another possible solution is for reputable outlets to issue token coins, which represent redemption claims on the issuer for a specified amount of the actual money commodity. Note that to perform their function well, even token coins would need to be recognizable in the community and difficult to counterfeit. For a modern example, consider the plastic chips issued by casinos: A Las Vegas casino needs to have chips that are distinctive and “authentic”-looking, and which can’t be easy for outsiders to replicate. Because such chips will be instantly redeemed by the casino, within its walls (and even perhaps in the surrounding neighborhood) they are “as good as money.” But a gambler who travels back home wouldn’t be able to buy groceries with chips issued from a Las Vegas casino.

Just as the money itself can arise without the intervention of political authorities, so too can the private sector handle the operations of turning the commodity money into coins. Indeed, numismatists agree that some of the highest-quality coins (and tokens) ever produced originated in eighteenth-century Britain from private mints.

The full story is too long to tell here,6 but the quick version is that the British Royal Mint had utterly failed to provide the common people with coins that could serve their needs for everyday commerce, and regulations prohibited banks from issuing notes in small denominations. As a result, employers resorted to various inconvenient remedies, including paying their workers in waves (so that, say, the first third of the employees would spend their new wages in town, after which the employers could then collect the coins in order to pay the second third of their workers, etc.) and making arrangements with the local tavern owners so that the workers’ beer tabs would effectively reduce the wages they were owed. The shortage of government-produced coinage was so severe that even obviously counterfeit coins were tolerated because bad money was better than no money at all.

In this intolerable situation, Thomas Williams, the principal owner of the giant Parys copper mine, hit upon the bright idea of installing a commercial-scale mint on the premises. He then struck (token) coins out of the copper with instructions on where they could be redeemed for money, and paid his workers—the ones actually mining the copper—with these token coins. Soon afterwards Matthew Boulton, famous for his collaboration with James Watt in the refinement of the modern steam engine, followed suit with the privately owned Soho Mint, where he was the first to implement a process of using steam power to mass-produce exquisite coinage. The following photos exhibit the remarkable craftsmanship of the privately struck coins and tokens from this era.7

Peck 1075 Coin A Penny from a Soho Mint 1797 pattern striking. Photo Credit: Bill McKivor, The Copper Corner. Promissory Half Penny 1791 A 1791 token promising a half-penny to the bearer. Photo Credit: Bill McKivor, The Copper Corner. The Function and Origin of Banks

Even in a community with a commodity money stamped into high-quality coins, there would still be limitations on commerce. For example, wealthy individuals would be nervous about holding vast sums of gold or silver in their homes where they would be vulnerable to theft, and it would be inconvenient to transport large amounts of coin or bullion for every transaction involving a significant purchase price.

A bank solves these problems by providing a secure location where members of the community can store their excess supplies of money. (The other main function of banks is to serve as credit intermediaries, which act as a conduit between borrowers and savers.) The goldsmith was a logical person to also act as banker, because his business already involved storing stockpiles of gold. It was easy enough for members of the community to deposit coins with the goldsmith in exchange for an official receipt indicating how much of the money commodity they (the depositors) had stored with him.

Exchange Gold for Promissory Note Diagram

The reason a booklet on the mechanics of money must also cover banking is that—to put it bluntly—banks enjoy the legal ability to create money. In chapter 5 we will explain this process in much greater detail, but for now let us quote the Chicago Federal Reserve on the historical origins (at least in England) of this practice:

[B]anks can build up deposits by increasing loans and investments so long as they keep enough currency on hand to redeem whatever amounts the holders of deposits want to convert into currency. This unique attribute of the banking business was discovered many centuries ago.

It started with goldsmiths. As early bankers, they initially provided safekeeping services, making a profit from vault storage fees for gold and coins deposited with them. People would redeem their “deposit receipts” whenever they needed gold or coins to purchase something, and physically take the gold or coins to the seller who, in turn, would deposit them for safekeeping, often with the same banker. Everyone soon found that it was a lot easier simply to use the deposit receipts directly as a means of payment. These receipts, which became known as notes, were acceptable as money since whoever held them could go to the banker and exchange them for metallic money.

Then, bankers discovered that they could make loans merely by giving their promises to pay, or bank notes, to borrowers. In this way, banks began to create money. More notes could be issued than the gold and coin on hand because only a portion of the notes outstanding would be presented for payment at any one time. Enough metallic money had to be kept on hand, of course, to redeem whatever volume of notes was presented for payment. [Emphasis added.]8

Once the banker (such as the goldsmith) realized that his deposit receipts (“notes”) were treated by at least some members of the community as being “as good as money,” he could lend out some of the coins that his customers had deposited with him, even though the customers still held paper receipts entitling them to immediate redemption. The whole operation was viable so long as the banker always had enough coins on hand to satisfy whoever might show up to demand their deposits back.

Exchange Gold for Promissory Note Many Diagram

This booklet will focus on the mechanics and economic implications of the fact that banks have the legal ability to create money, but we’ll wrap up our historical sketch here with a note on the judicial treatment. If someone hands over an item for safekeeping in which the specific article is important—such as a college student placing her furniture in a storage unit for the summer, or a diner checking his coat when entering a restaurant—this is handled under bailment law. In such a situation, the person acting as a warehouser obtains physical possession but not legal ownership of the items in question, and is obligated to act as their custodian until the actual owner wishes to retrieve them. It would be a breach of contract for the manager of a storage facility to rent out the student’s couch, even if he had it safely back in her storage unit when she returned from summer break.

However, when the deposited items are fungible goods, such as wheat or oil, then the relationship is more nuanced. With such an “irregular deposit,” the depositor isn’t entitled to the specific physical items that were handed over for safekeeping, but instead merely expects to receive comparable items back. In the typical scenario, this is the type of deposit applicable to money; the people handing over coins to the goldsmith didn’t care about receiving back those particular coins, they merely wanted to be assured of obtaining the same number of comparable coins when they redeemed their deposit receipts (i.e., banknotes).

As a result of various court rulings, it is now standard to treat the deposit of money with a bank as a loan, so that the depositor becomes a creditor of the bank and the actual ownership of the money transfers to the banker, even for “demand deposits,” which are payable upon notice. Rightly or wrongly,9 it is this legal treatment that allowed the proverbial goldsmith to lend out some of the coins that his depositors had placed with him for safekeeping, and which allows modern banks to engage in “fractional reserve banking.” To reiterate, it is this practice by which banks can create (and destroy) money—a process that we will fully explain in chapter 5.

We will close this chapter with an excerpt from an opinion issued by Lord Cottenham in the 1848 case Foley v. Hill and Others:

The money placed in the custody of a banker is, to all intents and purposes, the money of the banker, to do with as he pleases; he is guilty of no breach of trust in employing it; he is not answerable to the principal if he puts it into jeopardy, if he engages in a hazardous speculation; he is not bound to keep it or deal with it as the property of his principal; but he is, of course, answerable for the amount, because he has contracted.10

Judge Reading Ruling  
  • 1. Carl Menger, “On the Origins of Money,” Economic Journal 2 (1892): 239–55, https://cdn.mises.org/On%20the%20Origins%20of%20Money_5.pdf.
  • 2. The classic article from a trained economist captured by the enemy in World War II is: R. A. Radford, “The Economic Organization of a P.O.W. Camp,” Economica 12, no. 48 (November 1945): 189–201, http://icm.clsbe.lisboa.ucp.pt/docentes/url/jcn/ie2/0POWCamp.pdf.
  • 3. The most prominent modern critic of the standard “economistic” explanation for money is David Graeber, in his Debt: The First Five Thousand Years (Brooklyn, NY: Melville House Publishing, 2011). For a review of Graeber’s critique and a defense of the Mengerian approach, see Robert Murphy, “Origin of the Specie,” American Conservative, Apr. 11, 2012, https://www.theamericanconservative.com/articles/origin-of-the-specie/.
  • 4. For n goods, there are n*(n–1)/2 unique barter price ratios.
  • 5. Ludwig von Mises is the economist whose 1920 essay launched what has become known as the “socialist calculation debate.” He stressed the crucial function of economic calculation in guiding entrepreneurs in a market economy, so that they could assess whether their operations were using scarce resources for socially beneficial purposes. For an accessible discussion see Murray Rothbard, “The End of Socialism and the Calculation Debate Revisited,” Review of Austrian Economics 5, no. 2 (1991): 51–76, https://cdn.mises.org/rae5_2_3_2.pdf.
  • 6. The details of Britain’s coin shortage and the private-mint response are taken from George Selgin, Good Money (Oakland, CA: Independent Institute, 2008), chapters 1 and 2.
  • 7. The photos are gratefully used with permission from Bill McKivor, whose website (featuring these and other photos) is http://www.thecoppercorner.com/.
  • 8. Dorothy M. Nichols, Modern Money Mechanics: A Workbook on Bank Reserves and Deposit Expansion, rev. Anne Marie L. Gonczy, rev. ed. (1961; Chicago: Federal Reserve Bank of Chicago, 1994), p. 3, available at: https://upload.wikimedia.org/wikipedia/commons/4/4a/Modern_Money_Mechanics.pdf.
  • 9. For an elaborate case arguing against the practice of fractional reserve banking on both (traditional) legal and economic grounds, see Jesús Huerta de Soto, Money, Bank Credit, and Economic Cycles, trans. Melinda A. Stroup, (1998; Auburn, AL: Ludwig von Mises Institute, 2006), available at https://cdn.mises.org/Money_Bank_Credit_and_Economic_Cycles_De%20Soto.pdf. For a defense of the development of the legal treatment of fractional reserve banking, see George Selgin, “Those Dishonest Goldsmiths,” SSRN Working Paper, Apr. 14, 2010, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1589709.
  • 10. Foley v. Hill and Others, 2 H.L.C. 28, 9 E.R. 1002 (1848), quoted in Murray N. Rothbard, The Case Against the Fed (1994; repr. Auburn, AL: Ludwig von Mises Institute, 2007), pp. 42–43, available at: https://cdn.mises.org/The%20Case%20Against%20the%20Fed_3.pdf.
Categories: Current Affairs

Savings vs. Money: Which Is More Important?

Mises Institute - Wed, 29/01/2020 - 17:00

Conventional wisdom holds that savings is the amount of money left after monetary income was used for consumer outlays. Hence, for a given outlay, an increase in money income implies more savings and thus more funding for investment. This in turn sets the platform for higher economic growth.

Following this logic, one could also establish that increases in money supply are beneficial to the entire process of capital formation and economic growth. (Note: increases in money supply result in increases in monetary income and this, for a given consumer outlay, implies an increase in savings).

How Savings Support Goods Production

Savings are the amount of consumer goods produced in excess of the consumption of these goods. For instance, if a baker produces ten loaves of bread and consumes two loaves his savings are eight loaves of bread.

Now, let's say that the baker exchanges his saved bread for the services of a technician in order to enhance his oven. With an improved oven, the baker could increase his production of bread. Note that the saved bread, i.e., the baker's savings, paid to the technician enables him to maintain his life and well-being while he is improving the oven. Likewise, the other producers of consumer goods, by exchanging these consumer goods for the services or the products of various other producers, are supplying the latter with the means that support their life and well-being.

The producers of consumer goods can exchange saved goods with each other, with the producers of raw materials, the producers of tools and machinery, or the suppliers of various services. The saved consumer goods support all the stages of production, from the production of consumer goods to the production of raw materials, tools, and machinery, and all intermediate stages. (Note that individuals do not want various tools and machinery as such but rather as consumer goods. In order to maintain their lives and wellbeing, people require access to consumer goods.)

If the production of consumer goods were to increase all other things being equal (i.e., the pool of savings increases), it would permit the enhancement and the expansion of the infrastructure. Individuals could now be employed in the building of new stages of production, which prior to the expansion in the pool of savings could not be undertaken. This, in turn, would permit the production of a greater variety of consumer goods.

But the introduction of the new stages of production requires time. While in the process of enhancing the infrastructure, the various individuals employed must be supplied with consumer goods.

Once there has been a sufficient increase in the pool of consumer goods, individuals will be in a position to aim at further enhancing their well-being by seeking goods related to entertainment, for example, and services such as medical treatment.

The saved consumer goods support the various individuals that are providing entertainment and various services.

Introducing Money

The introduction of money does not alter what we have said so far. Now the producer of a consumer good exchanges his saved goods for money. But by exchanging his savings for money, he has still supplied the other producer with his saved goods. The money received by the producer is fully backed by his unconsumed production.

Whenever people acquire capital goods such as machinery, they transfer money to the individuals who are employed in making it. The machinery makers can choose to exchange the money not only for consumer goods but also for various services. The service provider who receives the money could in turn exchange it for consumer goods and services for himself.

Without the medium of exchange, money, no market economy and hence no division of labor could take place. But money is not the means of payment but the means of exchange.

Individuals pay with the goods and services they produce—they do not pay with money. Money only helps facilitate payments. Money enables the goods of one specialist to be exchanged for the goods of another specialist.

In Planning for Freedom (p. 66) Mises wrote,

Commodities, says Say, are ultimately paid for not by money, but by other commodities. Money is merely the commonly used medium of exchange; it plays only an intermediary role. What the seller wants ultimately to receive in exchange for the commodities sold is other commodities.

By means of money, an individual can channel savings, i.e., unconsumed consumer goods, to other individuals, which in turn permits the widening of the process of wealth generation. Whenever he deems it necessary, the individual can always exchange his money for goods.

There is, however, one provision in all this: the flow of the production of goods continues unabated. This means that whenever a holder of money decides to exchange some money for goods, these goods are there for him.

Despite its importance as the medium of exchange, according to Rothbard,

Money, per se, cannot be consumed and cannot be used directly as a producers' good in the productive process. Money per se is therefore unproductive; it is dead stock and produces nothing.1

Again, money's main job is simply to fulfill the role of medium of exchange. Money does not sustain or fund real economic activity.

Do People Save Money?

People do not save money but rather exchange it for goods and services. Once savings (saved consumer goods) are exchanged for money, the holder of the money can employ it immediately in an exchange for other goods or he may hold it temporarily.

Whether he uses it immediately in an exchange for other goods, puts it under the mattress, or keeps it in his pocket will not alter the given pool of savings. How individuals decide to employ their money will only alter their demand for money. This, however, has nothing to do with savings. (Note: by lending money, individuals in fact lower their demand for money. The act of lending does not alter the existing pool of savings, either.)

Likewise, if the owner of money decides to acquire a financial asset such as a bond or a stock, he simply transfers his money to the seller of financial assets—no present savings are affected by these transactions.

Problems emerge, however, whenever central banks embark on loose monetary policies. The expanded money supply is not backed by more consumer goods. When such money is exchanged for consumer goods, it amounts to consumption that is not supported by production. We now have more money chasing the same amount of goods.

Consequently, a holder of honest money, i.e., an individual who has produced real wealth, discovers that he cannot now get the equivalent value of all the goods he previously produced and exchanged for money all other things being equal. He discovers that the purchasing power of his money has fallen.

Any so-called economic growth within the framework of loose monetary policy can only take place if the private sector manages to grow the pool of savings despite the such policy undermining this process.

Remember that loose monetary policies give rise to non-wealth generating activities. Once the pace of non-wealth generating activities starts to exceed the pace of wealth generating activities the pool of savings comes under pressure. This sets the platform for a severe economic decline. (Both wealth generating and non-wealth generating activities require savings to support the various individuals engaged in these activities.)

We can thus conclude that savings is about consumer goods production in excess of the consumption of these goods. It is not about money, but about final consumer goods that support the individuals engaged in the various stages of production.

It is not money that funds economic activity, but the saved pool of consumer goods. The existence of money only facilitates the flow of savings. Any attempt to replace savings with money ends in economic disaster.

  • 1. Murray N. Rothbard, Man, Economy, and State (Los Angeles: Nash Publishing, 1970), p. 670.
Categories: Current Affairs

Franz Jägerstätter: Conscientious Objector

Mises Institute - Wed, 29/01/2020 - 15:00

Last month, Fox Searchlight Productions released Terrence Malick's new film A Hidden Life about Austrian conscientious objector Franz Jägerstätter. Jägerstätter was executed in 1943 for refusing to fight for the German state. Malick's film portrays the effects of this act of resistance, especially the devastating effects on Jägerstätter's wife and his children. It is an important film which shows the real-life implications of resisting the state in a totalitarian world. The film shows us the great difficulty of holding to one's principles in the face of draconian and violent punishment heaped upon those who refuse to participate in the state's designs.

Unfortunately, the film's subtlety and focus on the emotional states of the protagonists left many reviewers wondering what Jägerstätter's motivations really were. One reviewer thought the movie was really about today's politics, declaring the movie to be, "a warning for 2019 America," suggesting, ridiculously, that the Third Reich and the Anschluss are comparable to the modern American political milieu. Another critic recognized Jägerstätter's religious motivations, but wondered about the details: "Jägerstätter acts, we’re told, because he is a good man and because of Christ’s example of self-sacrifice. That may be true, but we learn very little else about him." Another critic declared the movie to be about "one person acting in conscience" without any reference to Jägerstätter's religiois views.

Given that the film does indeed leave much — perhaps too much to the imagination — rather than review A Hidden Life, it may be more useful to look at Franz Jägerstätter in his own words.

Jägerstätter the Man

Jägerstätter, who would be declared a martyr by the Catholic Church and titled Blessed Franz Jägerstätter in 2007, had remained almost completely unknown outside his home village in the years following the war. Thanks largely to the work of sociologist Gordon Zahn, however, information on Jägerstätter has become increasingly accessible in recent decades. With the 2009 release of Franz Jägerstätter: Letters and Writings from Prison, edited by Erna Putz, English-speaking audiences now finally have firsthand access to the Austrian farmer’s religious and political thought.

Thanks to these writings, we find that Jägerstätter's ideas of conscience were not vague or generalized. There were not based in modern secular ideas of enlightenment or popular notions of human rights. Rather, they were deeply rooted in the Christian gospels, and in his Catholic religious faith. It is even quite possible Jaegerstatter was encouraged in his anti-Nazi views both by the papal encyclical Mit Brennender Sorge (1937) and perhaps also by the anti-Nazi dissent of Jägerstätter's local bishop Johannes Gföllner of Linz, who died in 1941.

A farmer with a rudimentary formal education, Jägerstätter had been the only one in his village to vote against the annexation of Austria by the German state. By 1943, Jägerstätter had already long been a critic of the Nazis, and was known to say “pfui Hitler” (read: "phooey!") in response to “heil Hitler” from others in his village. Jägerstätter, who gave the impression of being an extremely run-of-the-mill farmer, was nonetheless unusual in his religiosity, and over time came to the conclusion that National Socialism was fundamentally incompatible with his faith. Although he was not inclined toward political activism, he was eventually forced into a position of resistance.

Made a citizen of the Reich against his will, Jägerstätter was drafted into the army and forced to take part in training exercises that took him away from his wife and his three young daughters for long periods of time. His experiences in the army only strengthened his resistance to the National Socialist war machine, and following a long series of delays and furloughs, Jägerstätter was ordered to report for combat duty in March of 1943. Concluding that he would not kill Poles or Russians for the glory of the German state, Jägerstätter reported for combat duty and declared that he would not fight. He was immediately arrested. In 1943, he was tried, convicted of treason and “demoralizing the troops,” and on August 9, 1943, at 4:00 PM he was executed by guillotine in Berlin-Brandenburg Prison.

The Nazi Creed

For a German or Austrian who was paying attention during this period, it was perhaps not difficult to see the inherent incompatibility between Nazism and Christianity. The notorious Nazi judge Roland Freisler, for example, had declared before the war that

Christianity and we are alike in only one respect: we lay claim to the whole individual. From which do you take your orders? From the hereafter or from Adolf Hitler? To whom do you pledge your loyalty and your faith?1

Long before the Anschluss, in 1933, when such things could be said without risk of a lengthy prison term, Bishop Gföllner declared publicly that “Nazism is spiritually sick with materialistic racial delusions, un-Christian nationalism, a nationalistic view of religion, with what is quite simply sham Christianity.” Again in 1937, Gföllner stated that “It is impossible to be both a good Catholic and a true Nazi.” By 1941, though, even those who thought similarly remained silent out of fear. Gföllner was gone, and many assuaged their consciences by telling themselves Nazism was necessary to fight against the Communists.

Most Catholics — Like Most Austrians and Germans at the Time — Went with the Flow

The lack of outside reassurance did not daunt Jägerstätter. Writing in 1942, he referred back to Mit Brenender Sorge and concluded that since National Socialism is “even more dangerous than Communism,” the Christian was morally free to refuse military service: “Is it not more Christian for someone to give himself as a sacrifice than to have to murder others who possess a right to life on earth?” In such comments, typical for Jägerstätter, he was communicating a personal mode of thinking that was far more radical than the popular interpretation of political matters at the time.

In the introduction to Erna Putz’s edition of Jägerstätter’s texts, Jim Forest notes that,

if not a doctrine found in any catechism, it was widely believed [at that time in Europe] that any sins you commit under obedience to your government are not your personal sins but are regarded by God as the sins of those who lead the state.

In fact, this was precisely the advice Jägerstätter received from the new bishop of Linz, Joseph Fliesser, with whom Jägerstätter met to discuss the morality of his upcoming conscientious objection. According to Jägerstätter, the bishop may have feared that Jägerstätter himself was a Gestapo spy and preferred to not even discuss the matter, but he counseled in favor of obedience. Jägerstätter later commented, without anger, that “[t]hey don’t dare commit themselves or it will be their turn next.” But in response to the argument that one is not morally responsible for immoral acts he is ordered to do, Jägerstätter dissented.

According to Forest,

for Franz it seemed obvious that, if God gives each of us free will and a conscience, each of us is responsible for what we do and what we fail to do, all the more so if we are consciously aware we have allowed ourselves to become servants of evil masters.

Not allowing oneself to become a servant of “evil masters” was of particular importance to Jägerstätter. He repeatedly criticized his fellow members of the “German-speaking people” for allowing the National Socialists to take power. Referring specifically to the Catholic regions of Bavaria and Austria, Franz asked:

Are Austria and Bavaria blameless in that we now have a N.S. [National Socialist] state instead of a Christian one? Did National Socialism simply fall on us from the sky?

He went on:

I believe that the German-speaking people never participated as strongly in Christian charitable activities as they are now engaging in the N.S. organizations. Nor were they as ready to contribute their money to church programs.

Frequently in his writings, Jägerstätter referred to National Socialism as a “stream” that pulled so many people along in its current, and from which it was difficult to escape.

Jägerstätter’s Ideology of Political Resistance

The nature of this stream helped explain why so few resisted the National Socialist regime, for as Franz noted, there are many “who do not want to swim against the stream because to do so is more difficult than to allow oneself to be washed along by the waves.” Yet in Jägerstätter’s mind, resistance was always possible no matter how strong the current of the stream might be. No matter how difficult, Jägerstätter wrote that resistance would be worth it:

Many among us have already died, though not for Christ but for a N.S. victory. Was a no such an impossibility and more beyond the capability of many people in 1938 than a yes? I believe not. But what can a no still bring about? Will it require the participation of many people? Without a doubt, one person need not ask others what it would mean and accomplish. For each individual, a no would have value in itself because it would free that individual’s soul.

Once the individual refused to consent, he could then take concrete action to refuse to participate in the regime:

In order to come to this personal decision, someone must be ready to stand up for Christ and the Christian faith, even if it means giving up one’s life. These people who have come to this decision can immediately withdraw from the N.S. Volk community and make no donations to it. Further, if they want to exercise Christian love of neighbor, they can contribute their wages to the poor without the help of the W.H.W. [the Winterhilfswerk, the Nazi welfare agency] or the Public Assistance program. Then they will be free to do with themselves as they want.

Jägerstätter did all of this himself at great personal cost in the form of alienation from his neighbors and lost income from the state, from which he refused to accept public assistance. Interestingly, we see here in Jägerstätter’s political program a plan of mass civil disobedience that could have been inspired by Etienne de la Boetie’s Discourse on Voluntary Servitude, although it is unlikely that Jägerstätter ever read it. In fact, we find in his writings a man who understood the key to undermining political power in the face of a dictator with untrammeled power. In Murray Rothbard’s introduction to the Discourse, he states that

Thus, after concluding that all tyranny rests on popular consent, La Boétie eloquently concludes that “obviously there is no need of fighting to overcome this single tyrant, for he is automatically defeated if the country refuses consent to its own enslavement.” Tyrants need not be expropriated by force; they need only be deprived of the public’s continuing supply of funds and resources. The more one yields to tyrants, La Boétie points out, the stronger and mightier they become.

Some would undoubtedly argue that open disobedience would only bring greater repression from those who did remain obedient, but in his mind, Jägerstätter failed to see how things would be worse had others like him actually stood their ground:

Things would be no worse today for genuine Christian faith in our land if the churches were no longer open and if thousands of Christians had poured out their blood and their lives for Christ and their faith. This would be better than now watching silently as there is more and more acceptance of falsehood.

In Jägerstätter’s time, as today, most saw resistance to tyrants as foolishness. It was much better to comply and save one’s skin. The Catholic clergy certainly did its part to talk Jägerstätter out of his plan of action. Jägerstätter’s local parish priest, who had himself served time in prison for speaking against Hitler, said, "I wanted to talk him out of it, but he defeated me again and again with words from the scriptures."

Jägerstätter Alone

Later, as the threat of execution became ever more real, Fr. Ferdinand Furthauer also tried to talk him out of it and later regretted his intervention, saying, “I often pray that Franz Jägerstätter may forgive me.” Franz’s wife, Franziska, was one of the few who supported him. According to Erna Putz,

[i]t was immediately clear to everyone that conscientious objection would cost Franz his life. His mother tried through relatives to change her son’s mind. Franziska spoke to him too, at the start. But as everyone tried to talk him round, as the arguments went on and he was quite alone against them all, she stood by him. “If I had not stood by him, he would have had no one,” she explained.

When many dragged their heels in going along with the regime, why did Jägerstätter draw such a clear line that brought condemnation down upon him? We know it was not just resistance to National Socialism’s inherent anti-Catholicism. The reasons were many.

Jägerstätter explained that “I cannot and may not take an oath in favor of a government that is fighting an unjust war.” It is unclear under what circumstances Jägerstätter would have been willing to take up arms for the state, although he did outline his objections to the National Socialist program specifically. Of great importance is the fact that he simply did not believe the Nazi propaganda. Hitler’s speeches and the speeches of his propagandists frequently mentioned God and the defense of Christian civilization as justification for the war. Jägerstätter clearly rejected this on the grounds that the National Socialists were anti-Christian, but also on the grounds that wars of conquest are, in their very nature, counter to the act of defending the faith:

When our Catholic missionaries went into pagan lands in order to make people Christian, did they go in with fighter planes and bombs[?]…Are we Christians today smarter than Christ himself? Do some of us truly believe that we can rescue Christian belief in Europe from a decline…by means of this massive shedding of blood? Did our good savior, whom we should always follow, go against paganism with his apostles as we German-speaking Christians are now going against [Bolshevism]?

We see that it was not just the nature of National Socialism but also the war itself that Jägerstätter so opposed. And it is important to note that he knew little of the true horrors of the war. What he did know about the atrocities and death camps of the east was largely hearsay and rumor in Jägerstätter’s place and time. He simply knew that bombing women and children in the name of national defense or in the name of defending the faith was not something he was going to support.

What of the advice others gave to him to save his own skin and rejoin his family? For Franz, these arguments failed even on a practical level. Consenting to go fight in the war, where he would be called upon to kill innocents, was only playing the odds. There had been already 750,000 casualties for the Reich at Stalingrad alone. If Jägerstätter were shipped off to the eastern front, what were the odds that he would ever return? So many men in his village had already been killed in action, leaving behind impoverished widows and orphans. So Jägerstätter had the choice of playing the odds, abandoning his convictions and hoping he might avoid a meaningless death on the front. Or he might refuse to kill for the state, even if it meant certain death. If one is to risk one’s life, Jägerstätter thought, would it not better to do it for Christ than for Hitler? In Jägerstätter’s view, if no one is guaranteed another day on earth, why let what little time one has left be wasted in fighting for the National Socialists? Why not die a free man rather than a slave? In his last note, Jägerstätter wrote,

Now I’ll write down a few words as they come to me from my heart. Although I am writing them with my hands in chains, this is still much better than if my will were in chains.

Very few came to the same conclusion, and, at the end, even Jägerstätter longed for some corroboration of his position. This came mere hours before his execution, when he was told that Fr. Franz Reinisch had recently been executed, also for refusing to fight for the Reich. This news strengthened Jägerstätter’s resolve all the more, and although we now know that over four thousand priests were executed by the Nazis for various sorts of disobedience, these cases were known by few at the time. Jägerstätter was executed as a traitor on August 9, 1943.

In the following years, Jägerstätter’s former neighbors regarded him as either an impractical eccentric or an outright traitor, and they offered his widow little help. In one interview, Jim Forest noted that after calmly recounting the death of her husband, Franziska Jägerstätter “broke down in tears while describing the subsequent behavior of her neighbors.” Franziska even lived in fear, and she later explained that “I thought no one would ever know about him. I hid his letters under my mattress for decades.”

Thanks to A Hidden Life, and the research of a tiny handful of scholars, Jägerstätter’s story is no longer in danger of being forgotten. And while the film does little to tell us the full story of why he refused to make war for the Nazis, perhaps its importance lies in how it shows just how difficult Jägerstätter’s choice was.

[Adapted form a 2012 article at LewRockwell.com.]

  • 1. From a letter to German dissenter Helmut James von Moltke.(See: https://www.dioezese-linz.at/dl/llNMJKJkkMkNJqx4MJK/Shining_Example_4_church_nazism.pdf) Freisler — who was was not exactly known for a sublime knowledge of human affairs — was wrong in his assessment of Christianity, however. Christianity demands "the whole person" only in the metaphysical sense. In worldly matters, Christianity has always tolerated a wide diversity of political views, regime types, cultural mores, and other artifacts of human society and culture. There is no specifically Christian regime, and there is no Christian version of the Führer who issues orders to obedient partisans. On the other hand, Friesler was right about National Socialism and his view reflects the common view among National Socialists that Christianity was incompatible with the new utopian ideology of the Thousand-Year Reich.
Categories: Current Affairs

Protectionism Is Not the Answer to the Canadian Fur Trade’s Problems

Mises Institute - Wed, 29/01/2020 - 12:00

The North American fur trade began in the seventeenth century, and though many think of it as history, it continues to this day, contributing almost $1 billion to Canada’s economy. Although there is global demand for fur—the US, China, and Hong Kong are the largest markets for Canadian fur—the industry is in decline. Prices have dropped significantly and overproduction relative to demand has led to a glutted market.

In particular, the wild fur industry is suffering. Improvements in farming techniques have allowed fur farms to conquer the market, and now two-thirds of Canadian fur is farmed. Although this is a boon for consumers, who now have a more steady and affordable supply of furs to enjoy, as well as for fur farmers, trappers are hurt by the change, which has recently manifested itself in two major players (the North West Company and the North American Fur Auction) moving to back out of the industry.

Unfortunately, many think that the solution to the issue of the ailing trade is for the government to step in to “protect” trappers from “market fluctuations” rather than allowing the market to change and reabsorb the trappers in new capacities. Although the trapping interests affected are still shopping around for private fur buyers, they’re also trying to involve the only entity that would ever consider pumping money into a declining industry: the state.

Private Responses to a Changing Market

On December 10, 2019, the Canadian Broadcasting Company (CBC) reported that the North West Company had decided to stop buying furs at its Northern Stores. The decision would affect trappers across the Canadian North, who would lose an important source of income since the company is often the only fur buyer in remote areas. The company’s reasons for suspending purchases were market based: declining fur prices—sometimes by 50 to 70 percent—and high inventories of unsold furs. (Fur buyers often pay trappers for their pelts in advance, shouldering market risks in the hopes of turning a profit later.) Just three days later, the company reversed its decision after receiving much criticism from “disgruntled customers” and trappers, interests that overlap in northern Canadian communities, where the Northern Store can be the only store.

Although of course the reversal does not change the facts of the market, it is an example of how private interests react and adapt to changing market conditions. In order to continue buying the furs, the company has partnered with the Fur Harvesters’ Auction (FHA), the largest wild fur auction house in the world. The North West Company, ideally situated to purchase wild furs, will act as an agent for the FHA, which is located in North Bay, Ontario, accepting the furs at its Northern and NorthMart stores and continuing to give trappers advances against auction sales.

The company’s initial decision to stop buying furs seems to have been spurred by the pending dissolution of its main buyer, the North American Fur Auction (NAFA), a major fur marketer that was originally part of the Hudson’s Bay Company. The Toronto-based NAFA decided to close up shop in November, having lost its primary lender after a long refinancing struggle. But when the announcement was made, the affected interests had already been mobilized to find a solution to the widening fissure in the market.

When the NAFA’s financial troubles became known, the Saskatchewan Trappers Association reached out to the FHA to see if it would be interested in filling the gap created by NAFA’s imminent failure. The FHA responded enthusiastically, allegedly “assur[ing] all the trappers across Canada here that they can handle the fur volume.” Knowing that there are multiple remaining buyers trying to fill an enduring consumer demand for fur, the association had turned to the Canadian fur marketer that arguably stands to gain the most from the gap created by the NAFA’s volatile circumstances, setting in motion a reorganization of the wild fur industry.

The FHA’s voluntary involvement in the North West Company’s reinstatement of fur sales suggests that there are still worthwhile profits to be made in wild fur in spite of the industry’s decline. No government force or groveling on the part of the fur producers was necessary to get the FHA to swoop in for the NAFA’s share of the fur market. This shows that, to some extent, trapping and wild fur production is still a productive enterprise—yielding a product that increases many people’s psychic profits.

For its part, the North West Company’s decision to accept furs again is more than a charitable PR move. Although Director of Business Development David Reimer allegedly “said the company acknowledges its responsibility to communities,” the reality is that a bunch of disgruntled customers would have had significant ramifications for business. Though fur sales represent “a very small percentage in terms of revenues” for the company, one of its primary business activities—as a retailer specifically to remote communities in the Canadian North (Read: places where trappers and their families live)—might have been severely impacted by local ill will.

Moreover, although the details of the North West Company’s deal with the auction house are not known, it’s likely that latter’s business prospects have been brightened considerably by the NAFA’s pending demise—perhaps enough that it ventured to offer the North West Company a commission that makes accepting furs lucrative once again. Whatever the case may be, private interests at various stages of the fur production process—producers and marketers—are engaged in a natural (if trying) process of reconfiguration in response to a major change in the market. (Remember, the NAFA’s operations date to the Hudson’s Bay Company’s 1670 founding).

Calls for the “Protection” of the Trappers’ Industry

But, as in other industries, there are voices clamoring for government involvement to “protect” the industry, in spite of its evident ability to respond to changing conditions, and they’ve already had some success.

On October 31, the Ontario Superior Court of Justice granted the NAFA creditor protection status, which prevents creditors from collecting their rightful property from borrowers who have defaulted on their obligations—a shameless act of corporate welfare. Specifically, the order “prevents the company from paying creditors with outstanding payments from before [October 31],” buying it more time to dispose of worthwhile assets, such as its “ranched mink portfolio,” which it is selling to Saga Furs.

In light of the industry’s near loss of the North West Company as a fur buyer—often the only one in remote northern communities, as mentioned—some have called for the Canadian government to buy the furs. In the Northwest Territories such a program is already in place, and nearly 650 trappers sell their furs to the state.

Francois Roussow, a fur marketer with the territorial government’s traditional economy division, thinks that “every jurisdiction should be running something like this especially in their northern communities to assist trappers to get out on the land.” Even if the all the rural provinces instituted such programs, though, Roussow thinks the company should continue buying furs because it “owes it” to the communities, and because it allows them to get quick money to spend at the stores.

In the same interview, however, Roussow admitted that the North West Company’s original decision aligns with the fur industry’s trend and mentioned several factors contributing to it, including competition from the ranched fur market, a saturated market, and changing tastes.

Roussow’s contradictory remarks reflect the dangers of central planning. He’s asking for the state to use its apparatus of legalized violence and theft to funnel indefinite amounts of money from Canadians’ pockets into fur-buying programs across the nation simply to “assist trappers to get out on the land.” He has the gall to say this knowing that the market is glutted with pelts and that the industry has virtually abandoned trapping as an inferior method of production (and possibly in keeping with some customers’ ethical concerns about wild fur and furbearer populations). Neither consumer demand nor costs make an appearance in his reasoning. The end is practically trapping for the sake of trapping: northern Canadians have made their living a certain way for a long time, so the Canadian government must supply them a buyer if there are none, rewarding that living over and above the vociferous preferences of consumers, who have voted wild fur down on their value scales.

Although the Saskatchewan Trappers Association clearly knows how to hunt for new fur buyers of its own accord, as its communications with the Fur Harvesters’ Auction shows, it too seemed to push for government intervention, albeit indirectly. The association reached out to the Ministry of Environment in its search for more auctioneers to replace the NAFA’s market share, not only seeking referrals but asking the department to do the legwork of connecting them with new buyers. Trappers also expressed concerns to the ministry about employment and compensation for unpaid furs provided to the NAFA, some of which were probably voiced through the association.

By directing their concerns to the state and asking for its assistance, trappers and trappers’ associations are tacitly calling for state intervention in the fur market. They are calling for insulation from market forces and for special privileges at the expense of other Canadians. Indeed, the Saskatchewan Trappers Association’s About statement shows this:

Composed of trappers and other interested persons, working for trappers and the fur industry in general…

We defend your right to trap and to harvest fur…

We speak…to Government resource related industries and the public in general…

We believe that the fur bearers of Saskatchewan should be properly managed for the benefit of everyone.

Although lightly cloaked in a rhetoric of public benefit, it is clear that the association’s goal is to prolong the lifespan of its industry by securing special favors from the state and pushing for barriers to entry for outsiders (such as trapping permits), as the final sentence implies. Attracted by the opportunity to coopt the power of the state, its goal is not merely to make a living, but to rig the industry in trappers’ favor by making economic failure impossible.

Instead of calling for the state to put a declining industry on life support at massive taxpayer expense, trappers and their allies in related industries should work to adapt to the changing market. Whether this will mean pursuing commercial trapping part-time or abandoning it altogether, creating fur farms, trying to influence consumer tastes, or simply hustling to find new buyers, as recently occurred, cannot be said for sure. The only thing that is certain is that uncertainty and change are facts of entrepreneurship and of human life, and that “protection” from market fluctuations is achieved only through a human shield put in place through coercion. It is no benign proposition, and it comes at the very real expense of others.

The fur trade has seen a lot of change in the past several centuries. The primary fur traded has varied, shifting from beaver (1600–1870s) to white fox (1900s–50s). The industry has also seen the expansion of its scope to include small furbearers such as ermine, as well as polar bears and seals. The division of the production process has varied, with the Hudson’s Bay Company once seeing a fox from its traps through the auction house, a process that market conditions eventually divided up, as we’ve seen. The stages of production themselves have evolved, as the dominance of fur farms indicates. If wild fur really brings consumers joy, satisfying the ends of their diverse value scales, the trade will transform again and see a new century.

Protectionism will only freeze the industry in its enervated transitional state and turn it into a stagnant affair, useful only to trappers—and arguably harming them simultaneously as they become dependent on rent seeking rather than their own resilience. Worst of all, it will be costly to taxpaying Canadians and to consumers, both due to the actual cost and the missed opportunity for greater human fulfillment through the natural (re)allocation of resources with shifting value scales.

Categories: Current Affairs

The high frequency trading tax

Adam Smith Institute - Wed, 29/01/2020 - 07:01

An unfortunate calculation here, forgetting that while there are costs to everything there are also benefits to everything:

High-frequency traders earn nearly $5 billion on global equity markets a year, creating a “tax on market liquidity”, according to a report by the City watchdog.

The first part of this being that there are costs to doing high frequency trading. The profits of the sector are not that $5 billion.

The Financial Conduct Authority (FCA) found that “latency arbitrage” races - when traders profit from reacting more swiftly to financial information than their rivals - take five to 10 millionths of a second, occur once a minute for FTSE 100 stocks and account for about a fifth of the overall trading volume.

The report said the practice leads to “a never-ending arms race for speed, to be ever-so-slightly faster to react to new public information”, which harms investors.

Rather more importantly, to call it a tax on liquidity is more than a little odd. For HFT provides more liquidity to the market. They are, after all, that fifth of trading volume. What does more liquidity mean? A smaller spread between buy and sell prices. That is, the market maker tax is diminished.

As it happens, at least coincident with the rise of HFT that market maker tax, that spread, has fallen by at least 99% in recent decades. For most large stocks it is, for the retail investor, now nothing.

There’s a reason why economists insist on a cost benefit analysis. Because we do need to know the both before we try decide upon the desirability or not of some thing.

Categories: Current Affairs

John Rossman on the Principles and Mechanisms of Business Growth

Mises Institute - Wed, 29/01/2020 - 01:45

John Rossman is an advisor who helps leaders compete in the digital era, by crafting and implementing innovative digital business models and capabilities. He was an executive at Amazon and launched the third party selling platform–in that way,he probably directly helped a number of our listeners become successful entrepreneurs. And he is the author of Think Like Amazon: 50 ½ Ideas To Become A Digital Leader—a tremendously useful book for everyone in business because it delivers a long list of actions you can implement immediately.

John asks that, if you read his book:

  1. You leave an authentic review at Amazon.com.
  2. You send him feedback about any of the 50 ½ ideas you have implemented in your own business, and tell him the outcome.
Principles and Mechanisms

John emphasizes the dual roles of what he calls principles and mechanisms in business growth. Principles are designed and communicated by company leadership: they are the few, fully codified, fundamental ways of operating that the entire company cares deeply about and executes unwaveringly. Amazon famously has 14 leadership principles starting with Customer Obsession.

But principles alone will not get the job done. They can’t implement themselves. So the second part of John’s message is that every principle must have a mechanism to operationalize it. A mechanism might consist of a complete set of generally applicable process steps and guidelines to follow them, adapt them to different circumstances, equip them with metrics and arm them accountability. The mechanism ensures that the principle can be executed again and again, by different teams on different projects across different parts of the organization and across cultures and generations. We illustrate a few of the examples that John shared with us in this accompanying graphic.

Principles Of Austrian Economics and Their Mechanisms

John’s insight about principles and mechanisms is the same one we implement at Economics For Entrepreneurs. Our principles are principles of economics. Our mechanisms are process tools we’ve summarized in our series of knowledge graphics.

For example, a core principle of Austrian Economics is the subjectivity of value. Every individual customer experiences value in their own idiosyncratic way, and the entrepreneur’s task is to gain insight into each individual’s sense of value, in order to be able to cater to it.We have provided three mechanisms to date for entrepreneurs to use to gather data about how individuals experience value in different ways, and to act upon that economic data:

Use the contextual in-depth interview tool to gather qualitative data for empathic diagnosis.

Follow the value learning process map in order to be able to facilitate value effectively.

Design and deploy a subjective Value Cycle system in order to be able to repeat the value facilitation process.

Our project is to continue to add to the inventory of mechanisms to help entrepreneurs in the implementation of economic principles.

Additional Resources

"Principles and Mechanisms" (PDF): Mises.org/E4E_50_PDF

Connect with John Rossman on LinkedIn: Mises.org/E4E_Rossman.

Categories: Current Affairs

Mises the Decentralist Hero

Mises Institute - Tue, 28/01/2020 - 20:00

Includes an introduction by Jeff Deist.

Ludwig von Mises and his work remain incredibly prescient and relevant today. The world needs his voice more than ever, and our speakers celebrate Mises as a supremely vital thinker well-suited for today's challenges. Recorded in Los Angeles, California, on October 26, 2019.

[All lectures from the Supporters Summit 2019 are available here.]

Categories: Current Affairs

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