Below is a comment received from reader Ictator61 on the recent post from Reason on Milton Friedman.
I have added my comments in blue. Towards the end, a series of actions that might be effective in turning the country around were proposed. I think his comments and expanding this list would be an interesting exercise for readers plus whatever other suggestions might be appropriate. A forum on this topic might be very useful for readers. especially with regard to your ideas of useful remedies.
Feel free to comment on this post accordingly. If there is enough interest, I will put up a discussion forum on the website where topics like this one can be started by me or readers and commented on by readers.
A forum could be started on a number of topics. Here are just a few topics where this community might be able to help each other:
- Are There Preferred Investment Strategies I should pursue?
- Should I expect a Banking System Failure?
- Should I stock provisions like food, guns, water and if so how much?
- Should I own physical gold and where should I hold it?
- How much should my neighbors know about what I am doing?
- Should I continue making contributions to IRA and 401Ks?
- Should I increase or decrease my level of borrowing?
These are merely a few suggestions. I am sure readers will be able to add many of their own. Together we may be able to become a trusted resource to each other.
Let’s me know of your interest. If there is some I will supply a forum for topics where people can ask questions, offer ideas or answer other’s question.
There are few books written on these topics. We have never had an impounding freight train barreling down at us in such a fashion. I never owned a gun until about a year ago. I think it prudent to have some protection, given what is happening in England and other parts of Europe and what should be expected in metropolitan areas in the country.
The reader’s inquiry was straightforward and dealt with Milton Friedman, not food, food supplies, water access, security etc. I tried to show how this reader comment could be made more informational for him and other readers by adding information that I knew. Below, may adds are in blue. Feel free to add you own comments in a different color.
Comments From Reader
I have a graduate degree in economics and have a wish: Milton Friedman was still alive and able to a participate in the public policy discussion that has to be going through all of the economic departments across this country. I remember the lively discussions about 40 years ago when Nixon ditched Bretton Woods government gold exchange (remember the FDR gold ownership ban was still in place at that time) and imposed wage and price controls. As an opponent of hard money, I’d be intrigued to see what Friedman would recommend today. His academic disciples have not been very visible, unless you place Bernanke in the category of a Monetarist. I’d call helicopter Ben a Keynesian who likes fiat financing.
Agree with everything above. Friedman, as opposed to the Austrians, believed that gold would decline in value once it was detached from the dollar. Friedman became more libertarian later in life. I recall one instance where he was being interviewed on some TV show and he was asked what his biggest mistake was. He replied that much of his earlier thinking was based on a false premise — that the government could be an objective referee. He indicated that influenced some of his positions in ways that he would reconsider. I suspect, although have no proof, that this assumption explains his expectations on the value of gold in 1971. He believed the Fed was independent and could be trusted to manage the money supply. Of course, he also advocated a fixed-rule to ensure that was so.
As an aside, Milton Friedman was the best in a classroom that I ever saw. He also was the best debater. I know that “pure” Austrians have problems with the Chicago School methodology of which Friedman was a leading proponent, but I believe he was the most influential individual of the 20th Century in terms of bringing free market ideas to the masses. He also was a nice, generous and helpful man. I disagree with some (probably few) of his positions, but believe he did more to influence free market ideas than anyone else. He had both the personality and the medium (TV) to do so. In addition, his verbal communication skills were extraordinary.
S&P has belatedly lowered the US debt rating. Tonight the Keynesian levers have all been pulled. The Monetarist levers have all been pulled. Weasely Nobel idiots like Krugman and his comedic sidekick Gore can prattle on about what our first Marxist president should have done to get this country out of the economic morass, but this much is crystal clear: statism does not work. The dollar failure is coming. The dollar, as the key international currency since WW II and world’s reserve currency, will probably be the last one of the major currencies to fold, but it won’t matter that a relative handful of much smaller governments will avoid the gross mismanagement of their currencies while the dollar as well as the rest of the federal government flops around like a fish out of water.
In these grim economic times it is important to remember that market economies are hard to destroy. This country has survived nationalization of industry during the 20th century’s wars (see railroad, telephone, telegraph, and shipping during WW I). Government regulation that has ranged from incompetent to incomprehensible has increased. The lefties prattling about “deregulation,” or “privatization,” need to visit the handful of places in the world where markets are allowed to flourish and there is a rule of law. I would put Singapore, Switzerland, and even Hong Kong in these categories.
With even stringent rules, the black market provides an alternative. Murray Rothbard, among others, identified the “black market” as a free market undeserving of stigma. Given the American tradition of freedom and individualism, more transactions will leave the radar screen. It would be better that people did not have to resort to these transactions, and I don’t mean for tax avoidance reasons, but that it adds costs to the economy that are unnecessary.
Money has always served as a medium of exchange. Until 1971 it also served explicitly or sometimes implicitly as a store of value. Austrian economists have regularly warned that government is the only institution that could take two valuable commodities, paper and ink, slap them together, and make them virtually worthless. Sadly, the history of the last 50 years is filled with governments that have regularly destroyed their countries financial system through the collapse of their sovereign debt through excessive fiat money printing. Today, with computers, one does not even need to print it. Your central bank can provide digital credits and the national government is off to statist spending sprees. The crazy Krugman’s of the world will provide an infinite number of rationalizations to support these “good intentions,” on the road to fiscal hell.
A medium of exchange is the definition of money, whether it be fiat currency, gold or conch shells. One of the reasons markets adopt a “thing” as money is because it is acceptable to others and retains its value in addition to some other attributes. The dollar was mandated as “legal tender.” It was not chosen by the marketplace. If there were freedom in money choice, the dollar would have been replaced long ago. Contracts written in other assets are subject to be overthrown by the courts, making such a replacement extremely difficult.
Gresham’s Law (bad money drives out good) still prevails, however. Even without a substitute currency people are favoring gold over the dollar even though it is not legal tender. It performs a store of value function well and has always tended to be the free markets choice for money.
I work with elected officials. One recently warned that he thought that we were entering another recession/downturn. This warning was televised, but ignored by the news media here. The next day the Dow dropped 512 points. I have warned him that the rewards in the Old Testament for prophets is not good.
This elected official is even distributing copies of Rothbard’s “What Has Government Done to Our Money?,” in his office. Sadly, this official is in no position to influence government monetary policies. I am quietly suggesting that elected officials read John Mauldin’s “Endgame.” I was delighted to read that a number of members of Congress from both parties had Mauldin come to Washington to visit with a dozen house and senate members recently. I read about this meeting from Mauldin’s email. The members of Congress then turned around and passed the pathetic debt ceiling extension that drew the S&P rebuke.
Sometimes good people can be found even in criminal enterprises, such as your political friend.
I am re-reading Friedman & Schwartz’s “Monetary HIstory of the U.S.,” and focusing upon the nasty economic downturn of 1920-21. What is interesting is the fact that the successful financial reforms that Harding/Coolidge administrations put in place seemed to defy the Monetarist wisdom about the need for monetary expansion. Monetary growth was a source of dispute between the Fed’s Benjamin Strong and Treasury Secretary Andrew Mellon during this time too. Mellon wanted more expansive monetary policies, so certain traits of treasury secretaries never changes.
I encourage you to finish the monumental work of Friedman and Schwartz. When done, read Rothbard’s account of The Great Depression for a different take.
Here is a quick list of steps that could solve our financial challenge in no particular order:
1) Repeal the income taxes and payroll taxes and replace it with the “Fair Tax,” on retail consumption.
2) If 1) won’t be done: implement a flat income tax (see Forbes and Armey).
3) If 1) or 2) won’t be done: make the Bush tax cuts permanent.
4) End the regulatory morass: end the war on industry being conducted by the EPA and end the effort to tighten ozone levels to below background levels of 60 PPB. Ditto for other dramatic but impractical efforts to put mercury in all our light bulbs while having them all built overseas and terminate the on going “manmade global warming,” fraud.
5) End the war on coal by the EPA.
6) Begin drilling for oil and natural gas on shore and off shore as well as promoting new drilling and recovery technologies. There is more oil shale in three western US states than all of the reserves in Saudi Arabia and Venezuela.
7) Sell off federal lands (see oil shale 6) and other assets like radio spectrum.
8) Terminate agencies like the NLRB that are driving businesses overseas. See Boeing’s effort to open a plant in South Carolina that is being fought by federal bureaucrats. Fire them and their bosses. Govt. “enterprises” like Fannie and Freddie need to be terminated. As long as the government is driving housing policies, this sector will not recover.
9) An alternate currency is an imperative. Hayek outlined options for a diverse array of backing for currencies. Abolish legal tender laws. Establish a framework for AU & AG re-monetization.
10) Require annual public audits of the Federal Reserve as well as the government’s gold reserves. Abolition of the Fed would be preferred but that is as unrealistic politically as this congress passing federal term limits (that is also needed IMHO). Stop funding the IMF, World Bank, UN, and other international parasites that only product the Geitner’s and Strauss-Kahn’s who promote fiat financing.
11) Federal “entitlement” programs are financially doomed. Their unfunded liabilities far exceed the approximately $15 trillion “on the books” federal debt. These programs must either reformed, replaced, or terminated. Rep. Ryan has his reform plan, but this only addresses the visible portion of the Medicare fiscal iceberg. And every day that the Obamanation remains in office with his congressional minions of Reed and Pelosi, the size of the entitlements financial problems worsens exponentially.
12) Congress should only be allowed to meet 60 days of the year. Every day they exceed this limit, they should be docked 2% of their pay. Federal budgets must be balanced and the congressional pay should be docked if it is not. The uncertainty created by the perpetual congressional session (an unintended consequence of the success of air conditioning that has now allowed contemporary Washington summers to be bearable) hampers industry. Federal employee salaries need to be tied to average private sector wages and benefits. Today, the outrageous salaries of our “civil servants,” is another data point on this country’s road to ruin.
There are more steps that should be taken, but the hour is late and this post is already too long. Others can fill in some suggestions for areas that I’ve missed.
If there is interest in helping each other in such a fashion, participate in this exercixe and report your interest. We can get full-fledged BB software that will provide great flexibility for responding to each other’s questions. Good way to help, to learn and to meet fellow readers. Let me know if you are interested.