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Sanctions against Russia Are the Lockdowns of 2022 | Mises Institute

Posted by M. C. on March 9, 2022

As Austrian economists have long pointed out, it is no coincidence that the century of total war rose at the same time as the era of central banking. By relying on debt and the printing press rather than direct taxation, nations could hide from the public the immediate costs of war. Over time, global powers have turned central banks into weapons themselves. America’s abuse of its power has even forced longtime allies to speak out.

Tho Bishop

Russia’s invasion of Ukraine is nearing its second week. Vladimir Putin’s military continues its push west, with clear attempts to encircle Kyiv. To date, thankfully, America and its North Atlantic Treaty Organization (NATO) allies have held off pleas from President Volodymyr Zelenskyy to enforce a no-fly zone, which would risk the eruption of a new hot world war. So instead, along with supplying arms, intel, and—potentially—runways and planes to Ukraine, the focus of the West has been economic warfare.

What is not clear is whether the West is prepared to deal with the actual consequences of this approach.

It seems that with every passing day, America and its allies find tools to escalate financial pressure on Putin. What began with targeted sanctions on the Russian leaders and oligarchs has expanded to cutting off Russian banks from SWIFT, broad attacks on Russian industries, and now complete bans on Russian oil and other exports by some—though not all—NATO countries. Moreover, Western corporations have reinforced these policies by indiscriminately banning Russian customers from various services.

This coordinate blanket canceling of Russia is not a tool crafted by the necessity of the situation, but rather a new application of the form of warfare that the West has become the most comfortable with. America’s weaponization of the dollar-backed financial system began with the war on terror, utilized against rogue state actors like North Korea, Iran, and Venezuela (the latter two Washington is now seeking assistance with for oil) and is increasingly used against domestic enemies.

Even the Swiss historical tradition of neutrality has failed to hold in an era of financial war.

Unfortunately for the West, Vladimir Putin is a far shrewder adversary than Kim Jong Un or Nick Fuentes. Russia is not only a major energy provider to global—and, in particular, European—markets but is a globally important exporter of wheat, fertilizer, metals, and other strategically important resources. To add to these concerns, the West has become increasingly frustrated by the refusal of other global powers—including India, Brazil, Mexico, and China—to follow their lead.

None of this should be particularly surprising. China’s interest in using Russia as a foil against American global hegemony has been clearly illustrated for years—even prior to Trump-era escalation and the covid outbreak. Nations like India, Brazil, and Mexico have seen the rise of nationalist political parties that have echoes Putin’s critiques of the globalist West.

Already Putin has demonstrated a willingness to wield his natural resources as a wedge to pull traditionally subversive global actors away from America’s leadership. The Russian government has made a list of countries that have been hostile to its military actions and has directed trade to favor countries that have remained neutral. Meanwhile, Russian nationalists have celebrated the West’s economic response to the Ukraine invasion, identifying the possibility of shifting consumer trends away from America- and Europe-based companies toward Eurasian products.

As a result, it is precisely the Russians that are the most culturally aligned with the West that are the most penalized by the American response to Putin’s actions. This is similar to the way American sanctions against Iran most victimized the most liberal members of their society.

While the West has made vividly clear its sense of moral self-righteousness in imposing this financial warfare, it is less obvious whether there are any planned off-ramps to deal with the shock back home. In America, gas has already hit all-time highs, while market signals indicate that the cost of food, energy, and other vital resources is soon to follow. In response, the Biden White House and its allies have lectured Americans on the virtues of electric vehicles and other forms of “green energy.” Not even Tesla’s Elon Musk believes this line of logic holds up.

Ultimately any attempts by Western governments to soothe the concerns of their citizens depend upon convincing them that the very same expert class that believed preconflict inflation was “transitory” is intellectually equipped to handle this new conflict. It is uncertain how successful they will be.

The question largely left unasked as firefights continue to play out on Ukrainian streets is what the long-term consequences of the West’s financial war on Russia will be. If peace were to break out tomorrow, what would that mean for market actors?

Many of the same leaders that have engaged in an increasingly vicious economic conflict with Russia supported debilitating lockdowns in the face of covid. In the case of the latter, many seemed to act as if the economy could simply be turned on and off with relative ease—like a computer suffering from an operating malfunction. The world is still dealing with the consequences. How long will the scars from this last?

What if Russia and China are serious about undermining America, the dollar, and its subservient allies? What if Putin recognizes that the economy of the debt-saturated West is far weaker than our policy makers believe it is? Is there any reason for Americans to question the judgment of the decision-makers at the Fed or Treasury?

As Austrian economists have long pointed out, it is no coincidence that the century of total war rose at the same time as the era of central banking. By relying on debt and the printing press rather than direct taxation, nations could hide from the public the immediate costs of war. Over time, global powers have turned central banks into weapons themselves. America’s abuse of its power has even forced longtime allies to speak out.

In 2020, global powers ignored the economic consequences of lockdowns in order to “boldly” respond to the perceived risks of covid. The damage done was catastrophic, and the impact of the policies was minimal.

In 2022, many of those same global powers are destroying the lives of innocent Russians to signal their virtuous opposition to invasion. Unfortunately, when the dust settles, the underlying damage done to their nations may be far worse.  

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Are We at the Inception of an Inflationary Depression? – International Man

Posted by M. C. on June 28, 2021

It is an acknowledged fact within the circle of Austrian Economists that the Central Banks have to continuously rely on and actively indulge in the propaganda of Voodoo Economics to hide the extreme imbalances that they have created in the world economy.

by Shanmuganathan Nagasundaram

It is an acknowledged fact within the circle of Austrian Economists that the Central Banks have to continuously rely on and actively indulge in the propaganda of Voodoo Economics to hide the extreme imbalances that they have created in the world economy.

What lies in the decade ahead for much of the Western economies and most parts of the world is a prolonged period of high inflation combined with an economic depression. I should add that if one were to account for inflation correctly, even today, we are probably in stagflation (inflation + recession) already in most parts of the world.  But the sleight of hand of Central Banks in the way they underreport consumer price inflation (CPI) will allow them to hide the reality for a few more months. If we draw a comparison between the stagflationary seventies (1970’s in which gold went from $35 to $850/oz, Oil from $3 to $40/barrel, etc.) and what lies ahead. In that, it’s a given that inflation is going to be substantially higher than what we had in the 1970s and the economic recessions much deeper.

Before I proceed further, it would be useful to clarify the term “Depression” used above. Most Economists confound Depression with Deflation. These are two different economic phenomenon – the former refers to the condition of GDP growth, and the latter refers to a monetary phenomenon. Depression denotes a prolonged period of rapid economic declines and a steep fall in the living standards of most people. It relates primarily to negative GDP growth by a substantial degree over at least a few years. On the other hand, deflation is a monetary phenomenon that refers to a condition of falling prices of consumer goods.

Depressions can be either deflationary or inflationary – in fact, more often than not, most depressions are inflationary. The 1930’s “The Great Depression” was deflationary, and the one we are living in the early stages of is going to be inflationary.

Does deflation lead to Depressions?

Most Economists think that deflation caused the 1930’s Great Depression, and this is a myth that the US Fed has entirely propagated. As Murray Rothbard explains in his book “America’s Great Depression,” Deflation (or falling prices) made the depression a lot more tolerable than would otherwise have been the case. The entire century before the formation of the US Fed (from 1815 to 1914), when the US was on the classical gold standard, was deflationary. This was the period in which the US economy transitioned from a primitive agrarian society to the world’s leading economic powerhouse with an estimated CAGR of more than 4% (with real growth being even higher due to falling prices) for a century.

If deflations result in a depression, the US ought to have been a basket-case with a century of deflation leading up to 1914. Ironically, with more than a century of inflation since then, courtesy, the US Fed, the US Economy is indeed a basket-case today, and the unraveling of the currency and the economy when it happens in the years ahead will be swift and decisive.

Now that a fundamental but important distinction has been made, we can expand on the theme of the Inflationary Depression ahead.

So how did we reach this precipice…?

Well, for the world to have reached such a precarious situation as I have painted above, the problems have to be deep-rooted, fundamental, and long-standing. That is the case, and as Mises said during 1951, the origins can predictably be traced to the Central Banks.

“There is nowadays a very reprehensible, even dangerous, semantic confusion that makes it extremely difficult for the non-expert to grasp the true state of affairs. Inflation, as this term was always used everywhere and especially in this country [the United States], means increasing the quantity of money and bank notes in circulation and the quantity of bank deposits subject to check. But people today use the term “inflation” to refer to the phenomenon that is an inevitable consequence of inflation: the tendency of all prices and wage rates to rise. The result of this deplorable confusion is that there is no term left to signify the cause of this rise in prices and wages. There is no longer any word available to signify the phenomenon that has been, up to now, called inflation. It follows that nobody cares about inflation in the traditional sense of the term. As you cannot talk about something that has no name, you cannot fight it. Those who pretend to fight inflation are, in fact, only fighting what is the inevitable consequence of inflation, rising prices. Their ventures are doomed to failure because they do not attack the root of the evil.”

What Mises rued above is commonly referred to as “Inflation is too much money chasing too few goods.” Or, as Milton Friedman said, “Inflation is and everywhere a Monetary Phenomenon.” What Mises spoke of in 1951 today is ubiquitous. It would be almost impossible to spot a single economic commentator (other than the handful of Austrian Economists) who would distinguish the cause from the effects when talking about inflation. To add insult to injury, most mainstream economic commentators believe that consumer price inflation is caused by growth and that “some” inflation is indeed good/desirable / required for economic progress.

The above US Fed propaganda of the witchcraft Keynesian economics has indeed been extraordinarily successful – so much so that after a century, even they seem to believe in it themselves. The last US Fed Chairman who understood the distinction between propaganda and the truth was Alan Greenspan. His essay “Gold and Economic Freedom” remains one of the best expositions written to date on this topic. The subsequent ones have been thoroughbred Keynesians, who pretty much subscribe to the above ridiculous notion as gospel truth.

So under the garb of promoting economic growth, we have just allowed the central banks around the world to print money with impunity. This has long been the case since 1971 when the last vestiges to Gold and Currency were removed. After Richard Nixon closed the Gold Window “temporarily” in 1971, the Central Banks have had little reason to restraint themselves. But they have indeed gone berserk after 2008, and even more so in the last year or two. Each transgression makes the erstwhile felony look like a misdemeanor.

Where has all the inflation, since 2008 – Gone?

See the rest here

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Some Conservatives Want Americans to Abandon Classical Liberalism. Don’t Listen to Them. | Mises Wire

Posted by M. C. on June 23, 2020

But Deneen’s new attack on libertarians helpfully serves as yet another example of some conservatives’ deeply misguided enthusiasm for attacking classical liberals and even attempting to condemn them as “un-American.” But just as Carlson and Bannon have employed bad economics to attack classical liberals in the past, Deneen now indulges in bad history.

Let’s consider some evidence…

Donald Trump’s economic populism, and his break with the established postwar conservative movement, has created an opening for new types of conservatism. Among these is the antimarket wing of the movement characterized by a renewed enthusiasm for trade controls, more spending on welfare programs, and more government regulation in the everyday lives of ordinary Americans.

The economic agenda has been voiced perhaps most enthusiastically by pundit Tucker Carlson and former Trump advisor Steve Bannon. Both have attacked what they apparently see as “excessive” freedom. This freedom—especially when exercised in the marketplace—has led, they believe, to the decline of the middle class for consumers and businesses which Bannon and Carlson blame for creating economic hardship in the United States. As a “solution” both have pushed for the state to seize and control even more of the economy than it already has.

The fact that the United States has only become consistently less free, both in terms of markets and in everything else, is strenuously ignored. These attacks on markets are, frankly, based on poor economics and a poor understanding of economic history, as I’ve noted here and here.

Not surprisingly, this way of thinking has led to new attacks on those who most support freedom in the marketplace (and everywhere else): classical liberals, also known as libertarians.

[RELATED: “‘Libertarian’ Is Just Another Word for (Classical) Liberal” by Ryan McMaken]

Carlson has specifically denounced libertarians for their free market views, as has Bannon. Both have even singled out “Austrian economists” as especially worthy of denunciation. Attacks on the laissez-faire liberals have proliferated, including unprovoked attacks from conservatives in First Things, the American Conservative, and The Spectator.

Is Classical Liberalism Un-American?

But perhaps the most aggressive attack on classical liberalism comes from Patrick Deneen, who has attempted to claim that classical liberalism has no place in American history at all.

In a new column this week, Deneen attacks libertarians and the entire liberal tradition in general. Not content with merely criticizing the liberals/libertarians as too extreme, as Bannon and Carlson do, Deneen seeks to recast classical liberalism altogether as a pernicious, foreign, and dangerous ideology. According to Deneen, this ideology—the ideology of Thomas Jefferson, Lord Acton, and Frederic Bastiat, among many other defenders of freedom and natural rights—has nothing at all to do with “the American tradition.”

This general thesis of Deneen goes well beyond his article this week, and his odd and ahistorical view of classical liberalism has already been explained here at by both David Gordon and Allen Mendenhall. But Deneen’s new attack on libertarians helpfully serves as yet another example of some conservatives’ deeply misguided enthusiasm for attacking classical liberals and even attempting to condemn them as “un-American.” But just as Carlson and Bannon have employed bad economics to attack classical liberals in the past, Deneen now indulges in bad history.

Let’s consider some evidence.

Yes, the American Revolutionaries Were Classical Liberals

Deneen’s first mistake in this week’s column is claiming that liberalism was not a central factor in the American Revolution. This rather unbelievable claim is derived from Deneen’s belief that liberalism of all types “requires liberation from all forms of associations and relationships, from family to church, from schools to village and community.”

As Mendenhall notes, this is not at all a sound definition of classical liberalism. But from this rather questionable premise, Deneen then concludes that the only real liberals in America at the time were the few disciples of John Locke (i.e., the Jeffersonians and their allies). After all, in Deneen’s view, it was only the Lockeans who embraced the atheism, hedonism, and the mania for the accumulation of material possessions that Deneen thinks characterize the classical liberals. Thus, those Americans who still embraced institutions like church and family were not liberals at all. Deneen thus contrasts “a small number of Lockeans” during the Revolution to the “larger population of Christians” to illustrate that the classical liberals were at odds with the main nonliberal part of the population.

The real founding ideology of America, we are told, was a Christian “common good conservatism” which valued community above individual conscience and above individual rights. This claim is central to Deneen’s basic thesis here, which is that any American revolutionary who was a Christian was necessarily not a liberal.

But the Lockean view and Christianity are not mutually exclusive. As David Gordon points out, there is significant evidence that Locke “defended divine and natural law and argued for the existence of God.” Moreover, in his history of economic thought, Rothbard shows that Locke, for all his deviations, was well within the natural law tradition handed down from medieval Christian Europe. It was easy for Americans to adopt the basic classical liberal and Lockean framework without abandoning Christianity. Indeed, Deneen’s idea that anyone embracing Locke’s ideas of “life, liberty, and property” must be some sort of avaricious atheist strains the bounds of plausibility. Yet Deneen treats this idea as if it were unassailable.

Moreover, a look at the actual historical record shows widespread adoption of liberal ideals during the Revolution. As Rothbard illustrates in the fourth volume of Conceived in Liberty, liberal ideals spread rapidly during the period, and in quite a radical way. Opposition to slavery spread, and indentured servitude declined precipitously. Old feudal laws were overturned. The system of land sales and distribution was democratized. Religious freedom was far more widely embraced. Rothbard notes that the Revolution was a civil war conducted by “fanatics” and zealots who rejected “the siren call of compromise.”

Rothbard maintains that these legal, social, and military upheavals were animated by liberalism/libertarianism. After all, if slavery, indentured servitude, and feudal land grants were all perfectly acceptable to “the common good” by Americans conservative Christian one minute, how did these things become unacceptable just a few years later? The answer lies in the spread of liberalism among Americans during the revolutionary period. The very idea of “the common good” changed as the public embraced liberalism.

State-Sponsored Churches Declined Because America Embraced Classical Liberalism

Deneen also claims that the post-Revolutionary period was little affected by liberalism. Specifically, he asserts that the First Amendment of the Bill of Rights was designed not to increase religious freedom, but to increase the power of the established churches in the states:

The Bill of Rights was in fact proposed and ratified in order not merely to forbid the government from establishing a religion, butprevent the federal government from interfering in the existing State establishments. (emphasis in original)

In Deneen’s view, the First Amendment’s “original intention” was to help the state governments in “protecting these establishments.” He insists that the American revolutionaries understood that the state governments must have state-supported churches or society would descend into “war of all against all.”

Once again, the historical record is not on Deneen’s side.

While there is not doubt that some revolutionaries were in favor in maintaining state-favored established churches, that fact is that most Americans—animated by individualistic classical liberal ideals—saw religion more as a matter of personal choice and conscience. This was already in play by the late eighteenth century, when, as Rothbard notes, “the previously hysterical-anti-Catholicism that had permeated the colonies” was abandoned in favor of toleration. During the Revolution no fewer than eight states moved to allow Roman Catholics to hold public office. These were hardly the actions of populations clinging to the idea of empowering the local state-supported churches.

At the same time, the established churches, those churches Deneen claims were so dear to Americans at the time of the Bill of Rights, went into steep decline and had disappeared by the 1830s. State governments ceased to support their established churches, and, as historian Ann Douglas has described it, “between the Revolution and the Civil War, the [formerly established] sects which were disestablished lost ground in every sense while the largest ‘dissenting’ groups, which had never received state support, flourished.”

That is, the old established churches—the Congregational and Presbyterian churches, for example—were abandoned in droves by Americans who embraced the idea that religious faith was a matter of individual choice. In Deneen’s mind, this seemingly illustrates a disgraceful march toward chaos. But most Americans were apparently unconcerned. Americans didn’t abandon Christianity, of course. Their newfound liberalism required no such thing. But Americans did embrace a religious order based on purely voluntary, private institutions far from the old mindset of those who supported the established churches of old.

The American Political Tradition Is Liberal and Libertarian

These are just two examples of Deneen’s rewriting of history, but they serve to show how he appears to have become convinced that classical liberalism is incompatible with the sorts of institutions that any social conservative would value. Consequently, he seeks to read classical liberalism out of American history almost in its entirety.

In actual practice, however, classical liberalism has never been a danger to the Christian civilization that Deneen defends. On the contrary, as Mendenhall concludes:

The classical liberalism or libertarianism to which Christian individualists adhere promotes peace, cooperation, coordination, collaboration, community, stewardship, ingenuity, prosperity, dignity, knowledge, understanding, humility, virtuousness, creativity, justice, ingenuity, and more, taking as its starting point the dignity of every human person before both God and humanity. This individualism prospers in fundamentally conservative cultures and does not square with Deneen’s caricature of a caricature of a caricature of “liberal” individualism.

Indeed, liberalism has historically been a key component in providing the freedom necessary to allow institutions of civil society to flourish. A strong private sector protects churches and communities from the power of the state. A robust economy allows families to establish independence without a reliance on state largesse or on a small number of state-favored monopolistic firms. Without these freedoms, all of civil society becomes a hostage to the ruling junta or regime. That sort of dependence may seem fine so long as those who favor our social views are in power. But what happens when our friends are no longer in charge?

Today, we see precisely what happens. After decades of empowering the state with an ever longer list of prerogatives and prohibitions, those who control the state can now easily turn on those institutions that are so central to the kind of society Deneen would like to see. The solution lies in scaling back the power of the state and insisting that large sectors of civil society are simply off limits from the state’s coercive power. The solution lies in allowing free association, free contracting, freedom in religious practices, and freedom to use our property as we like.

Throwing classical liberalism under the bus won’t help.


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