Krugman IS NOT an economist

William Anderson has dedicated much resources to this, and done so in a manner far more eloquently than I could.  However, once again, Krugman proves that apparently PhD’s in economic are oftentimes not worth the paper they’re printed on.  But come to think of it, the easy money he advocated, and what it’s done to the dollar, I gather makes that apropos!!

So, he writes

So why the sudden ubiquity of deficit scare stories? It isn’t being driven by any actual news. It has been obvious for at least a year that the U.S. government would face an extended period of large deficits, and projections of those deficits haven’t changed much since last summer. Yet the drumbeat of dire fiscal warnings has grown vastly louder.

To me — and I’m not alone in this — the sudden outbreak of deficit hysteria brings back memories of the groupthink that took hold during the run-up to the Iraq war. Now, as then, dubious allegations, not backed by hard evidence, are being reported as if they have been established beyond a shadow of a doubt. Now, as then, much of the political and media establishments have bought into the notion that we must take drastic action quickly, even though there hasn’t been any new information to justify this sudden urgency. Now, as then, those who challenge the prevailing narrative, no matter how strong their case and no matter how solid their background, are being marginalized.

And fear-mongering on the deficit may end up doing as much harm as the fear-mongering on weapons of mass destruction.

Love the rhetorical trick here.  What he does is cast anyone who is concerned about deficits into the Iraq War camp.  Oh sure, he doesn’t say they’re the same necessarily, but he clearly implies such by their proximity.  And he fails, or refuses, to mention that deficits were and have been an issue for quite some time.

Reagan criticized at length of the Carter deficits, then suffered the same when he ran higher ones.  There was the Gramm-Rudman deficit reduction bill.  Then Bill Clinton made a point to balance the budget.  Then during the Bush years, deficits were a serious topic for both parties.  So Mr. Krugman once again, how shall I say it, lies.

Perhaps he could have made the case that after all the years of fret over the deficits, they haven’t had the impact, etc.  But instead, he chooses to rewrite history, as if deficits never occurred prior to his beloved leader, and now, suddenly, they’ve arrived.

Let’s talk for a moment about budget reality. Contrary to what you often hear, the large deficit the federal government is running right now isn’t the result of runaway spending growth. Instead, well more than half of the deficit was caused by the ongoing economic crisis, which has led to a plunge in tax receipts, required federal bailouts of financial institutions, and been met — appropriately — with temporary measures to stimulate growth and support employment.

The point is that running big deficits in the face of the worst economic slump since the 1930s is actually the right thing to do. If anything, deficits should be bigger than they are because the government should be doing more than it is to create jobs.

Yes, the deficit is entirely the result of spending.  Besides the massive increases by the Bush administration, and the largest entitlement since LBJ, throw in TARP, the stimulus, and all the bailouts, plus the even greater increases in spending by this administration, and yes, it is spending.

Tax receipts fell, there is no doubt.  But blaming the lack of taxation is like the obese blaming thier condition on the lack of locks on restaurant doors.

As for running deficits now and creating jobs…might as well flap your arms and jump off a rooftop to try and fly.

Why, then, all the hysteria? The answer is politics.

The main difference between last summer, when we were mostly (and appropriately) taking deficits in stride, and the current sense of panic is that deficit fear-mongering has become a key part of Republican political strategy, doing double duty: it damages President Obama’s image even as it cripples his policy agenda. And if the hypocrisy is breathtaking — politicians who voted for budget-busting tax cuts posing as apostles of fiscal rectitude, politicians demonizing attempts to rein in Medicare costs one day (death panels!), then denouncing excessive government spending the next — well, what else is new?

I’ll grant him this: the republicans are every bit as bad as democrats.  Actually, I would argue they’re worse.  The democrats don’t even pretend, the republicans do, to being fiscally responsible and desiring of smaller government.  So, I rate theft and hypocrisy, versus just theft, as the greater of the two.

I’ve been asked by people what my feelings towards Paul Krugman really are.  In all honesty, I must confess that I don’t accept that he actually believes 1/2 of what he writes.  He simply can’t.  He’s a smart guy.  Or maybe he’s written such nonsense for so long, he can’t remember what is what anymore.

Simple fact is that deficits do matter, especially when they double our debt in such short time.  Maybe he should reread some introductory macro texts, even some of the ones he’s written.  But it’s deeper than that, and he knows it.

It’s the deficits that are making real recovery impossible.  The very fact that the government has propped up bad firms, prolonged malinvestments, and inflates the currency hoping to prolong the bubble, only impoverishes us and lengthens and deepens the depression.  Maybe he ought to brush up on his Bastiat too.

Truth is, any economist who argues that massive deficits are a good thing simply isn’t an economist.

You don’t take power in a republic

Egads, what do supposedly knowledgeable people think?

At the end of Barack Obama’s worst week since taking power a year ago, the US president’s fortunes look set only to deteriorate over the coming days. Following the shock defeat of the Democratic candidate in Massachusetts on Tuesday, a move that deprived the president of his 60-seat super-majority in the Senate and left his legislative agenda in tatters, Mr Obama has just four days to reboot the system.

What on earth are they thinking, “taking power”.  Well, perhaps they are simply analyzing his first year in office, the greatest power grab since FDR.

In a republic, which I guess we used to be, and pay lip service towards today, power is inherent in the people.  ”Taking” power can mean only one thing, and I prefer the word seizure, such as befits dictators and their authoritarian ilk.

Of course, “power to the people” really is nothing more then Lenin’s “all power to the soviets”.  True power rests in one’s liberty to do as one pleases, with their property, as they see fit.  It is one’s liberty to engage in peaceful relations with their fellow citizens, without interference.  It is liberty from agression and force, always at the hands of the state.

In fact, in a republic, the state has little to no power at all.  So, the very fact that Obama has “taken power” is all one needs to know.

Is all pooling theft?

A while back I wrote about pooling in regards to insurance and how it is theft.  I was asked by a colleague if all insurance pooling is theft.  The answer is no.

Insurance is something you don’t plan to use which is why health insurance, as most people view it and use it, isn’t insurance at all.  It is instead what is called cost shifting, whereby you are consuming at a lower price, more than you otherwise would given accurate market prices, while the rest of the price is picked up by others.  What makes this palatable, at the very least, is that presumably the costs are borne by many and the extra cost incurred is small.

This is truly a sucker’s game, one that has driven up health care expenditures while simultaneously driving down out-of-pocket contributions.

Or, as Homer Simpson says, “DOH!!”

So, is health insurance, or any insurance for that matter, a sucker’s game?  Hardly.  The problem is that pooling is done mostly through force which is why the market distortions occur.  And it is a very profitable venture for two of the three parties involved: the insurers (and is it ever profitable) and the over-consumer.  The third, who is forced into the system, who under-consumes, is the victim in every sense of the word.

Pooling done through choice however is not only valuable, but vital, for a free economy.

Any venture comes with a risk, even as mundane a task as driving to the store for groceries.  Economists know that the greater the risk, the less the chance of the action.  While this is similar to the concept of opportunity cost, it differs only in that the negative outcome or loss, is not certain.  Buying a $50 pair of shoes necessarily means that one forgoes a $50 pair of pants, with the same $50.   (For those who write for the NY Times, this is sometimes referred to as a basic principle of economics, which Austrians believe hold always.  For instance, “depression era economics” still means that scarcity exists.)

However, buying a pair of shoes comes with the risk that usage will cause painful blisters.  In other words, the cost would be actually higher than just the pants.  It would be pain and discomfort as well.  Of course, some women will consider that the price of fashion!!  Some stores have fairly liberal return policies regarding shoes and lest anyone think otherwise, that policy comes with a cost and it is figured into price of every pair of shoes.  It’s true.  But, it is why people prefer to buy shoes from a store with such a return policy.

So, assume one buys a pair of shoes from a store with a liberal return policy, and the shoes do not cause them pain.  They still paid the premium for the return policy but they did not get back their money spent on such.  What they actually bought was peace of mind, thus they remain equally satisfied.

As we can see, risk is a part of every transaction and the riskier the venture, the greater the risk premium.  For instance, let’s take a simple example.

Person A in January has a 50/50 chance of incurring a $5000 expense in July.  So, Person B says to A, “for a $1000 premium in January, I’ll pick up the $5000 bill in July.”  Person A is faced with a decision: forgo $1000 in January and all that could be purchased, never to see it again, or keep it and hope that he gets lucky in July.

Many factors are involved here, and as Austrians know, money, like any other good, has diminishing marginal utility.  So, much would be dependent upon the use of the $1000.  If for instance, A needed to fix their car as their job was traveling salesman, it might be worth the risk as losing the job would be far  more damaging.  The point is that one has to weigh the risks of present and future values.

That’s actually a pretty good bet, one most would take.  If the numbers were for instance, $1000 premium to protect against a $1500 July bill, most would probably decline.  Thus, a July bill somewhere between $5000 and $1500 would be the tipping point, though I’ve no idea exactly what that number would be.  This would be, could only be, determined in the market.

This is why it is vital for free economies to work that there be a free (as in truly free market, not forced consumers and over regulated and burdened insurers) functioning insurance market.  Entrepreneurs take risks, some greater than others.  People invest their capital in wealth creating activities with hopes of future reward.  If borrowing the money, they will have to pay a risk premium, usually in terms of a higher rate of interest.  And when the market sets that risk premium, that rate or interest and desired rate of return, then the risk/reward model is the great engine of economic growth.

It is the single reason why the most prosperous economies are ALWAYS the freest.

(Note: it might have written that the freest economies are the most prosperous, but this syntax is erroneous.  Austrian theory is grounded in the causal-realist approach, that there is cause and effect.  By this, I mean that if “free economies are prosperous” is synonymous with “prosperous economies are free” than I am denying that one causes the other.  This is false.  Economic freedom creates wealth and prosperity.  Prosperity doesn’t ever “just happen” nor would it be possible for prosperity to create freedom.  It is in considering it in that manner, prosperity creating freedom, where it becomes clear.  Thus, freedom is the required antecedent, and thus a casual relationship.)

There is another side to insurance, ameliorating unintended loss.  This is a perfect case for actual health insurance.  Oddly enough, there is a large and dynamic market for term life insurance, the most extreme example of loss.  This is exactly what the health care insurance market should very closely resemble as they are remarkably similar.  Quite simply, no one hopes to use their term life insurance, and I imagine, no one truly ever does!!  Let’s face it, the one(s) actually using the term life insurance isn’t going to be the person whose name is on the policy.

Although the one with their name on a health insurance policy would be using it, likewise, it would be something they would hope never to use.  A perfect example is catastrophic insurance such that s one were to be afflicted with a severe illness, instead of a million dollar hospital bill, one might only incur say a $10,000 bill.  You don’t ever plan on accruing a million dollar hospital stay, so any premiums paid towards such would be completely to avoid that risk.  And nothing else, period.

Returning to pooling, the original example is poor only in that no insurer would underwrite such a policy.  Here’s why: for every two people that pay into the plan, one is going to receive a $5000 payoff, or $2500 per person insured, while the premiums collected would be $1000 per person.  In other words, while collecting $2000, they are paying out $5000.  (for quick reference, that’s sort of how social security will work in a few years!)  What they need to do is collect more than $2500 per person.  Thus, for this example to work, the premiums would need be at the least, $2501.

This system works wonderfully as long as like risks are pooled together voluntarily.  Thus risks, premiums, and payouts truly and accurately reflect consumer desires.  Car insurance works in the fashion.

Using a simple numerical example will help.  For many drivers, the chance of a $100,000 liability in an accident is remote, say 1 in 1000.  Thus, all that is needed would be 1001 drivers to purchase a $100 policy, as 100,000/1000 = $1000 per driver payout.  (Yes, the additional driver adds a fraction to the per driver payout, but for this example, it is insignificant.)  It works wonderfully as a $100 premium is a pittance compared to a potential $100,000 bill.

Insurance companies do quite well because they charge in excess of $100 per person.  And they do this not because they are greedy and evil, but because the risk protection is worth far more than $100 to each driver.  In fact, it is probably worth several times that.  So, instead of collecting $101,000, they charge say $250 per driver for such a policy, and end up  collecting $250,000 total.  If that’s sufficient to lure others into the car insurance business (again, assuming a free market, no regulatory rent seeking firms blocking such), great.  More competition, better services, and lower prices.  If not, great.  Consumers are still purchasing exactly what they want at the market price.

And as such, voluntary pooling of similar risks represents a vital and extremely valuable tool for risk management.  It is not theft in any way, shape, or form.  But forced pooling of disimilar risks most certainly is.

Will the pilot’s license be renewed?

Helicopter Ben might not get his license renewed.

That’s good news, except that anyone else dear leader appoints is probably gonna turn on the spigots even more.

Love this quote:

“The American people are disgusted with the greed and recklessness of Wall Street,” Sen. Bernie Sanders, I-Vt., said in an interview with The Associated Press last month. “People are asking, ‘Why didn’t the Fed intervene at the appropriate time to stop the casino-type activities of large financial companies?’”

Bernie, got some news for you.  The Fed DID intervene.  It caused the casino-type activities.  Furthermore, it was sold as wealth creating.  Turns out, it was the opposite.

Now, don’t think Bernie is an Austrian or leans that way.  He’s a self-described socialist so wealth creation is only what comes from government spending, and wealth confiscation is the means.  But, at least he’s aware of the dangers of the Fed.  Is he aware of the dangers of fiat currency?

No glory in the bay state

Yes, the seat that belonged to a monstrous thief for half a century, the seat that stole more wealth, massively grew leviathan, expanded the evil hand of the state into every aspect of people’s lives and in general, was the avowed enemy of liberty lovers everywhere, was given to a man who will specifically vote against the takeover our our heath.  Good.  Even the people of Massachusetts, the most left leaning state in the Union, have reached the breaking point.

However, there is no glory in this “victory”.

State Senator Scott Brown’s campaign became national, attracting the money and support of million around the country.  Is that democracy?  Perhaps.  Is that good?  Hardly.

Perhaps it was in essence a referendum on the administration, and in that, if the verdict in Mass is 52-47 (not accounting for the ACORN factor which adds +5% to democrats), then nationally, one can figure that it’s it’s probably 3-1 against.  Okay, there’s “hope” for the nation.

Popular election of senators was a cornerstone of Progressive Era politics.  That Scott Brown relied on a nationalization of his election only serves to undermine constitutional republican ideals.  For does he not owe his seat to “the people” and thus his allegiance?

Senators were to be representatives of the states to the federal government.  A resident of California, Ohio, or even neighboring Rhode Island, ought to have no interest in who Massachusetts send to the senate.  Likewise, a senator from Massachusetts ought to have no impact to residents on California, Ohio, or Rhode Island.

In nationalizing a state election, it only expands the democratic goals of the progressives, and empowers Washington DC.  Every senator is in essence a national office holder, rather than a state representative making the Senate close to a national assembly.  And it’s safe to say the last “National Assembly” wasn’t too friendly to limited government or individual liberty.

My satisfaction that the takeover of health care might have been dealt a fatal blow is tempered by the means by which it occurred.

Economic ignorance never ceases

Part of the problem we face today is the unbelievable ignorance or basic economics.  You’d think, or at least hope, that such silly ideas as printing money and massive government debt would be seen as the great acts of destruction they are.  Nothing exemplifies this grand ignorance better than this:

The weakness over the year reflected the battering that consumers have taken from the worst recession since the Great Depression, a downturn that has cost 7.2 million jobs and left households trying to rebuild savings depleted by losses on Wall Street and a crash in housing prices.

I’ll wager $1 million that no econ major from any Ivy League school would see the terrible error in that passage.  But I’d wager $1 million that ANY student at Mises U would not only see it, but would harass me for such an easy question.

Now, where is the error?  ”savings depleted by losses on Wall Street and a crash in housing prices”  NEITHER of those are savings.  And that is actually the root of our current mess.  People acted as though they were.

Look, it’s actually quite simple.  Savings is income not spent.

Now, let’s look at a practical reason why, for instance, housing prices are not real savings.  Forgetting for the moment how unbelievably stupid the actual notion is that housing prices equal savings.  In fact, that idea only serves to demonstrate a complete lack of any understanding of what prices really are.  Anyways…

If one buys a house for $250,000 in 2003 and following Alan and Ben’s dirty deeds done dirt cheap, it’s value appreciates to $500,000 in 2006 (and by the way, this was very much the case in many housing markets.  I can attest personally…).  Now, let’s say I decide to buy something with that “extra” $250,000.  Do I go to the bank and withdraw it, or do I have to borrow the money?

Well, the answer is so obvious that one would have to be a Princeton professor who moonlights for the NY Times…

So, that alone ought to end all debate on whether it’s actually savings.  Thus, no savings were lost, nothing to rebuild.  Same is true of course of 401k’s:  prices DO NOT equal savings.

Need more proof?  Okay.  If that “extra” $250,000 were really savings, then it would show up in banks’ balance sheets as excess reserves that could be lent.  Your home’s increased equity doesn’t show up in any bank ledgers.  It only records the appraised value at time of the loan.

But again, it is such terrible ignorance that helps begin to explain the catastrophe we’re in.

Can he really be that clueless

Well, he was an economic advisor for the previous president, not something I’d want to put on a resume’ !!

Greg Mankiw asks “IS galloping inflation around the corner?“

It’s not only “around the corner”, it’s already here.  One, the doubling of the monetary base IS inflation.  And unless he missed it, foreign countries and investors are dumping the dollar as fast as possible.  The value of the dollar on international markets has plummeted, adding an inflation premium to imported and import dependent goods, most notably gasoline.

At least he can claim one thing: he isn’t an economic advisor for this administration.

Force, Force, and only Force

I’m not usually going to play the blog linking/analyzing game, but this one ought to be addressed as it is entirely what this administration is about.

Ann Althouse, law professor and blogger extraordinaire, writes in response to Martha Coakley’s abortion response:

She’s a lawyer, and she ought to know that Roe v. Wade — along with other abortion cases — does not require services. There is a world of difference between having a right to do something and having the power to make other people do things for you as you try to exercise that right. If you don’t know the difference between those two things, you don’t understand how rights work. Other people have rights too. Refusing to perform an abortion is not a violation of the constitutional right to privacy.

Now Ann I’m sure is a brilliant legal scholar and certainly (as she voted for the guy!!) was too smart to be deluded by dear leader’s eloquence and circumlocutions.

It’s always in those rare moments when one is caught off guard does the real truth become evident.  Dear leader’s “spread the wealth” was an obvious one.  This one too.

See, what this administration believes entirely in is force.  It’s a modern and gentler version of Rousseau’s “forced to be free” but nonetheless, force and compulsion.  If you choose not to have health insurance, you’ll be forced to anyways.  If you refuse to perform abortions, you’ll be forced to.

You “have a right” to a house, health care, a job, etc., and others will be forced to provide these for you.  So, unless she’s been living under a rock or is choosing to be willfully ignorant of dear leader’s intentions, then for them the right to abortion means forcing others to perform one, even if against their conscience.

There used to be a time when the left would have riled against such gross abuses of power.  Now they champion them.

And the carnage continues…

And the carnage continues…

Nonfarm payroll employment edged down (-85,000) in December, and the unemployment rate was unchanged at 10.0 percent, the U.S. Bureau of Labor Statistics reported today. Employment fell in construction, manufacturing, and wholesale trade, while temporary help services and health care added jobs.

This is the December 2009 report.

Unemployment remains “stuck” at 10.0%.  U6 is at 17.3%, up from 17.2 in November.  But there’s even more important news which most will miss…

CPI rose .4% and even more importantly than that, the PPI rose 1.8%.  In fact, here’s what is striking about the PPI report.

Change from the last 12 months: finished goods – 2.4%; intermediate goods – 1.4%; crude goods – 5.7%.

The rising prices in intermediate and especially crude goods will only increase in the coming months and will soon translate into higher finished goods prices.  In a recession, with a large surplus of labor, an economy that is weak, hemorrhaging jobs, with declining investment, we are seeing inflation (in the mainstream vernacular of course).

It ought to be clear by now that stimulus not only doesn’t, but actually does the opposite.

Wisdom from the ancients

One can learn much from the ancients.  Thucydides tells us much about human nature, as does Aristotle.  The great Greek playwrights probed the human psyche and provide still the best analyses.  Economics, though strictly speaking, was not a discipline they examined, with the exception perhaps of Xenophon.

Two great ancient Roman historians, Livy and Tacitus,  give great insight that all libertarians ought to treasure.

Livy wrote volumes on the early history of Rome, though sadly much has been lost to us today.  One of most remarkable tracts was History of Rome.  In the 5th century BC, Rome was still small yet growing, constantly at war with her neighbors, under threats from the likes of the Volscani, Aequi, Veneiti and others.  There was to be a recurring theme: internal strife caused by sharp class divisions temporarily suspended by warfare.

One of the serious early concerns was agrarian reform, which was really tantamount to land redistribution.  Here’s the account of re-elected consul Aemilius and his attempt to curry favor with the plebians:

Aemilius had already in his former consulship advocated the grant of land to the plebeians. As he was now consul for the second time, the agrarian party entertained hopes that the Law would be carried out; the tribunes took the matter up in the firm expectation that after so many attempts they would gain their cause, now that one consul, at all events, was supporting them; the consul’s views on the question remained unchanged. Those in occupation of the land-the majority of the patricians complained that the head of the State was adopting the methods of the tribunes and making himself popular by giving away other people’s property, and in this way they shifted all the odium from the tribunes on to the consul. (3.7)

So, it is not just in modern times that governments use threats of force and distribution of stolen property as a means of ensuring their power.

A few years later, the tribune Terentillus challenged the consul’s authority and urged passage of a law that stipulated that all power of the consuls comes from the people, that the consuls (though they were supposed to adhere to the law, and were by no means “kings”, they still still ruled for the most part by fiat) cannot rule according to their whims.  This would be in essence what we would consider constitutional governance.

Gaius Terentilius Harsa was a tribune of the plebs that year. Thinking that the absence of the consuls afforded a good opportunity for tribunitian agitation, he spent several days in haranguing the plebeians on the overbearing arrogance of the patricians. In particular he inveighed against the authority of the consuls as excessive and intolerable in a free commonwealth, for whilst in name it was less invidious, in reality it was almost more harsh and oppressive than that of the kings had been, for now, he said, they had two masters instead of one, with uncontrolled, unlimited powers, who, with nothing to curb their licence, directed all the threats and penalties of the laws against the plebeians. To prevent this unfettered tyranny from lasting for ever, he said he would propose an enactment that a commission of five should be appointed to draw up in writing the laws which regulated the power of the consuls. Whatever jurisdiction over themselves the people gave the consul, that and that only was he to exercise; he was not to regard his own licence and caprice as law. (3.8)

To put down the threat of losing power, as is the case with modern governments as well, to what ends did the consuls turn?

The following year the new consuls, P. Volumnius and Ser. Sulpicius, were confronted by the proposed law of Terentilius, which was now brought forward by the whole college of tribunes. During the year, the sky seemed to be on fire; there was a great earthquake; an ox was believed to have spoken–the year before this rumour found no credence. Amongst other portents it rained flesh, and an enormous number of birds are said to have seized it while they were flying about; what fell to the ground lay about for several days without giving out any bad smell. The Sibylline Books were consulted by the `duumviri,’ and a prediction was found of dangers which would result from a gathering of aliens, attempts on the highest points of the City and consequent bloodshed. Amongst other notices, there was a solemn warning to abstain from all seditious agitations. The tribunes alleged that this was done to obstruct the passing of the Law, and a desperate conflict seemed imminent.

As though to show how events revolve in the same cycle year by year, the Hernici reported that the Volscians and Aequi, in spite of their exhaustion, were equipping fresh armies. Antium was the centre of the movement; the colonists of Antium were holding public meetings in Ecetra, the capital, and the main strength of the war. On this information being laid before the senate, orders were given for a levy. The consuls were instructed to divide the operations between them; the Volscians were to be the province of the one, the Aequi of the other. The tribunes, even in face of the consuls, filled the Forum with their shouts, declaring that the story of a Volscian war was a prearranged comedy, the Hernici had been prepared beforehand for the part they were to play; the liberties of the Roman were not being repressed by straightforward opposition, but were being cunningly fooled away. It was impossible to persuade them that the Volscians and Aequi, after being almost exterminated, could themselves commence hostilities; a new enemy, therefore, was being sought for; a colony which had been a loyal neighbour was being covered with infamy. It was against the unoffending people of Antium that war was declared; it was against the Roman plebs that war was really being waged. After loading them with arms they would drive them in hot haste out of the City, and wreak their vengeance on the tribunes by sentencing their fellow-citizens to banishment. By this means–they might be quite certain–the Law would be defeated; unless, while the question was still undecided, and they were still at home, still unenrolled, they took steps to prevent their being ousted from their occupation of the City, and forced under the yoke of servitude. If they showed courage, help would not be wanting, the tribunes were unanimous. There was no cause for alarm; no danger from abroad. The gods had taken care, the previous year, that their liberties should be safely protected.

War.

Next we turn to Tacitus and his examination of early Imperial Rome in his Annals.  During the reign of Tiberius, Rome was wealthy and powerful.  It’s senators basked in ostentatious wealth and grandeur and governed with almost unlimited power.  The emperors ruled by dictate and lived in palaces that would make the Bourbons jealous.  Intrigue at the royal court was a game of intense rivalry and violence.

In this passage, Tacitus displays brilliant insight into the degrading of the human condition that state largesse has.

He [Tiberius] also increased the incomes of some of the Senators. Hence it was the more surprising that he listened somewhat disdainfully to the request of Marcus Hortalus, a youth of noble rank in conspicuous poverty. He was the grandson of the orator Hortensius, and had been induced by Augustus, on the strength of a gift of a million sesterces, to marry and rear children, that one of our most illustrious families might not become extinct. Accordingly, with his four sons standing at the doors of the Senate House, the Senate then sitting in the palace, when it was his turn to speak he began to address them as follows, his eyes fixed now on the statue of Hortensius which stood among those of the orators, now on that of Augustus:- “Senators, these whose numbers and boyish years you behold I have reared, not by my own choice, but because the emperor advised me. At the same time, my ancestors deserved to have descendants. For myself, not having been able in these altered times to receive or acquire wealth or popular favour, or that eloquence which has been the hereditary possession of our house, I was satisfied if my narrow means were neither a disgrace to myself nor burden to others. At the emperor’s bidding I married. Behold the offspring and progeny of a succession of consuls and dictators. Not to excite odium do I recall such facts, but to win compassion. While you prosper, Caesar, they will attain such promotion as you shall bestow. Meanwhile save from penury the great-grandsons of Quintus Hortensius, the foster-children of Augustus.”

The Senate’s favourable bias was an incitement to Tiberius to offer prompt opposition, which he did in nearly these words:- “If all poor men begin to come here and to beg money for their children, individuals will never be satisfied, and the State will be bankrupt. Certainly our ancestors did not grant the privilege of occasionally proposing amendments or of suggesting, in our turn for speaking, something for the general advantage in order that we might in this house increase our private business and property, thereby bringing odium on the Senate and on emperors whether they concede or refuse their bounty. In fact, it is not a request, but an importunity, as utterly unreasonable as it is unforeseen, for a senator, when the house has met on other matters, to rise from his place and, pleading the number and age of his children, put a pressure on the delicacy of the Senate, then transfer the same constraint to myself, and, as it were, break open the exchequer, which, if we exhaust it by improper favouritism, will have to be replenished by crimes. Money was given you, Hortalus, by Augustus, but without solicitation, and not on the condition of its being always given. Otherwise industry will languish and idleness be encouraged, if a man has nothing to fear, nothing to hope from himself, and every one, in utter recklessness, will expect relief from others, thus becoming useless to himself and a burden to me.“

These and like remarks, though listened to with assent by those who make it a practice to eulogise everything coming from sovereigns, both good and bad, were received by the majority in silence or with suppressed murmurs. Tiberius perceived it, and having paused a while, said that he had given Hortalus his answer, but that if the senators thought it right, he would bestow two hundred thousand sesterces on each of his children of the male sex. The others thanked him; Hortalus said nothing, either from alarm or because even in his reduced fortunes he clung to his hereditary nobility. Nor did Tiberius afterwards show any pity, though the house of Hortensius sank into shameful poverty. (Book II)

Does this sound all too familiar?  State diversion of resources, stealing property, and the end result: industry will languish.

Thucydides repeated throughout that “human nature being what it is…” and Livy wrote “Human nature, however, does not change…”  Greek tragedies have a familiar theme: a man, full of hubris, thinks he can do no wrong.  Filled with this, he sets about in pursuit of goals believing the he alone has the power to alter and transcend reality.  In the end, the nemesis appears, their hamartia or fatal flaw is revealed, the man becomes chastened, and ate’, the final fall occurs.

We are living today in a rebirth of Greek tragedy and Roman history.  We have leaders filled with such hubris, that they alone can reorder the economy and only through their wisdom can we be saved.  They believe that through bailouts, theft, redistribution, stimulus, printing money, and other acts of destruction, that a better end will result.

Obama’s fall is soon.  And does not this attitude resemble the entirety of Keyenesian and Monetarist economic ideas.  Just leave the economy to the wise masters, let them print the money, prime the pump, nationalize industries, inflate the currency, lower interest rates, and all will be well.  No market could possibly arrange and allocate resources nearly as well.

Except that it does.

And at the same time we are undergoing the greatest act of theft and stealing of others’ property in or nation’s history.  And to distract the nation, we get “enemies”: doctors who perform unnecessary procedures, protestors who simply wish to stop the theft, Fox is not a real news network (because it won’t repeat the party line), anyone who disagrees with the administration is racist, more escalation of wars, and  enshrinement and institutionalizing of destruction of liberty.

Does our senate today resemble the august deliberative body of a republic, or a corrupt institution of an empire?

The ancients provided the wisdom for us to learn from.  It’s time we do.