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Washington is once again gripped by the specter of a government shutdown, as Congress and President Trump negotiate an end-of-year spending deal. A main issue of contention is funding for President Trump’s border wall. Sadly, but not surprisingly, neither Congress nor the administration is fighting to cut, or at least not increase, spending.

Federal spending has increased from 3.6 trillion dollars to 4.4 trillion dollars since Republicans gained control over both chambers of Congress in 2014. Some may try to defend congressional Republicans by pointing out that for two years the Republican Congress had to negotiate spending deals with President Obama. But federal spending has increased by 7.5 percent, or over 300 billion dollars, since Donald Trump become President.

A big beneficiary of the Republican spending spree is the military-industrial complex. Republicans have increased the “defense” budget by eight percent in the past two years. President Trump and congressional Republicans claim the increases are necessary because sequestration “decimated” the military. But Congress, with the Obama administration’s full cooperation and support, suspended sequestration every year but one, so the planned cuts never went into full effect. Congress and Obama also “supplemented” the official military budget with generous appropriations for the Pentagon’s off-budget Overseas Contingency Operations fund. Spending on militarism increased by as much as 600 billion dollars over the amounts allowed for under sequestration.

President Trump has proposed reducing the projected military budget for fiscal year 2020 to 700 billion dollars. This would be a mere two percent cut, yet the usual voices are already crying that this tiny reduction would endanger our security. If history is any guide, the military-industrial complex’s congressional allies and high-priced lobbyists will be able to defeat the president’s proposed reductions and convince President Trump to further increase the military budget.

This huge military budget has little or nothing to do with America’s legitimate security needs. In fact, as candidate Trump recognized, America’s military interventions in the Middle East have endangered our security by empowering terrorist groups like ISIS and al-Qaeda.

While the warfare state has been a big beneficiary of the Republican spending spree, the GOP has hardly neglected the welfare state. Domestic spending has increased seven percent since 2016. Except for a half-hearted attempt to repeal Obamacare and some food stamp reforms that were included in and then dropped from this year’s farm bill, Republicans have not made any effort to roll back or even reform the welfare state.

The farm bill, which Congress is expected to pass this week, will spend as much as 900 billion dollars over the next ten years. Much of that spending will be on taxpayer subsidies for wealthy farmers and even “farmers in name only.”

Trump’s budget deals have been supported by the majority of Democrats. Even those who have called for the president’s impeachment are more than happy to vote with him when it comes to increasing spending and debt. These Democrats are the mirror image of 1990s Republicans who made a big spending deal with President Clinton while simultaneously trying to impeach him.

We suffer from too much bipartisanship when it comes to the welfare-warfare state. This bipartisanship has resulted in a national debt that is rapidly approaching 30 trillion dollars. This will inevitably lead to a major economic crisis. The way to avoid this crisis is to replace the bipartisan welfare-warfare consensus with a new consensus in favor of limited government, peace, free markets in all areas including currency, and auditing then ending the Fed.

 
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After a week of insisting that a meeting with Putin on the sidelines of the G20 meeting in Argentina was going to happen, President Trump at the last minute sent out a Tweet explaining that due to a Russia/Ukraine dispute in the Sea of Azov he would no longer be willing to meet his Russian counterpart.

According to Trump, the meeting had to be cancelled because the Russians seized three Ukrainian naval vessels in Russian waters that refused to follow instructions from the Russian military. But as Pat Buchanan wrote in a recent column: how is this little dispute thousands of miles away any of our business?

Unfortunately it is “our business” because of President Obama’s foolish idea to overthrow a democratically-elected, pro-Russia government in Ukraine in favor of what his Administration believed would be a “pro-Western” and “pro-NATO” replacement. In short, the Obama Administration did openly to Ukraine what his Democratic Party claims without proof the Russians did to the United States: meddled in a vote.

US interventionism in Ukraine led to the 2014 coup and many dead Ukrainians. Crimea’s majority-Russian population held a referendum and decided to re-join Russia rather than remain in a “pro-West” Ukraine that immediately began discriminating against them. Why would anyone object to people opting out of abusive relationships?

What is most disappointing about President Trump’s foreign policy is that it didn’t have to be this way. He ran on a platform of America first, ending foreign wars, NATO skepticism, and better relations with Russia. Americans voted for this policy. He had a mandate, a rejection of Obama’s destructive interventionism.

But he lost his nerve.

Instead of being the president who ships lethal weapons to the Ukrainian regime, instead of being the president who insists that Crimea remain in Ukraine, instead of being the president who continues policies the American people clearly rejected at the ballot box, Trump could have blamed the Ukraine/Russia mess on the failed Obama foreign policy and charted a very different course. What flag flies over Crimea is none of our business. We are not the policemen of the world and candidate Trump seemed to have understood that.

But now Trump’s in a trap. He was foolish enough to believe that Beltway foreign policy “experts” have a clue about what really is American national interest. Just this week he told the Washington Post, in response to three US soldiers being killed by a roadside bomb in Afghanistan, that he has to keep US troops fighting in the longest war in US history because the “experts” tell him there is no alternative.

He said, “virtually every expert that I have and speak to say if we don’t go there, they’re going to be fighting over here. And I’ve heard it over and over again.”

That is the same bunkum the neocons sold us as they lied us into Iraq! We’ve got to fight Saddam over there or he’d soon be in our streets. These “experts” are worthless, yet for some reason President Trump cannot break free of them.

Well here’s some unsolicited advice to the president: Listen to the people who elected you, who are tired of the US as the world’s police force. Let Ukraine and Russia work out their own problems. Give all your “experts” a pink slip and start over with a real pro-American foreign policy: non-interventionism.

 
• Category: Foreign Policy • Tags: Donald Trump, Neocons, Russia, Ukraine 
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The Department of Health and Human Services (HHS) recently released proposed rules allowing individuals to opt out of Obamacare’s abortion and contraception mandates for moral or religious reasons. These new rules should be cheered by all who agree with Thomas Jefferson that forcing people to subsidize that which they find abhorrent is “sinful and tyrannical.”

Sadly, Congress continues to pass, and President Trump continues to sign, spending bills subsidizing abortion providers. When government gives taxpayer money to abortion providers, it forces anti-abortion taxpayers to fund something they believe is murder. This is every bit as “sinful and tyrannical” as forcing health plans to pay for abortion and contraception.

If Congress is going to continue giving taxpayer dollars to abortion providers, then it should at least find a way to protect those with moral or religious objections to abortion from subsidizing the practice with their tax dollars. Creating a special fund for the taxes of those who object to abortion and ensuring money in that fund is not used to subsidize abortion providers would help ensure that anti-abortion taxpayers are no longer directly subsidizing what they believe is the murder of unborn children. However, it would force pro-life taxpayers to indirectly subsidize abortion because money is fungible. So, if the government used money from the pro-life taxpayers to increase spending on programs that do not subsidize abortion, it would be able to use a greater percentage of the taxes collected from other taxpayers to fund abortionists.

A better way to protect anti-abortion taxpayers is to give them an expanded charitable tax credit. Pro-life taxpayers could use the credit to support crisis pregnancy centers and other charities that help pregnant women and new mothers. This approach would increase funding to private charities, while ensuring that, since the plan reduces government revenue, anti-abortion taxpayers are neither directly nor indirectly subsidizing abortions.

Opponents of abortion are not the only Americans who should be allowed to opt out of paying for what they consider murder. The many Americans with moral and religious objections to Washington’s militaristic foreign policy should also be able to redirect some of their taxes from the warfare state to private charities. Some may claim this would weaken America’s defenses. However, since America’s military budget is higher than the combined military budgets of the next seven biggest spending countries, and since our militaristic foreign policy has little or no relation to actual security, there is no reason the military budget cannot and should not be reduced.

Allowing taxpayers to opt out of subsidizing war and abortion would be major victories. However, there are other government programs that might offer exemptions for moral or religious objections. For example, followers of Ayn Rand have moral objections to government-funded welfare. Some Christians also find government-provided welfare morally objectionable because they believe it is the duty of the church, not the state, to help the less fortunate. Others may find corporate welfare, the drug war, or restrictions on the First and Second Amendments morally objectionable.

It may be impossible to find a welfare-warfare state program that does not offend someone’s moral or religious beliefs. For many the entire welfare-warfare state is immoral because it is built on a foundation of aggression. The only way to stop the government forcing taxpayers to subsidize activities they consider immoral is to return to limited, constitutional government that does not steal from the people via the income tax and the inflation tax.

 
• Category: Ideology • Tags: Abortion, American Military 
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The Pentagon has finally completed its first ever audit and the results are as many of us expected. After spending nearly a billion dollars to find out what has happened to trillions in unaccounted-for spending, the long look through the books has concluded that only ten percent of all Pentagon agencies pass muster. I am surprised any of them did.

Even the Pentagon is not surprised by the failure of the audit. “We failed the audit. But we never expected to pass it,” said Deputy Secretary of Defense Patrick Shanahan. Can we imagine any large US company subject to the prying eyes of the IRS being so unfazed by the discovery that its books have been so mis-handled?

As with all government programs, but especially when it comes to military spending, the failure of a program never leads to calls for funding reductions. The Pentagon’s failure to properly account for the trillions of taxpayer dollars shoveled in year after year only means, they say, that we need to send more money! Already they are claiming that with more resources – meaning money – they can fix some of the problems identified by the audit.

If you subsidize something you get much more of it, and in this case we are subsidizing Pentagon incompetence. Expect much more of it.

Outgoing chairman of the House Armed Services Committee, Rep. Mac Thornberry, warned against concluding that this mis-handling trillions of dollars should make us hesitant to continue sending trillions more to the Pentagon. The failed audit “should not be used as an excuse for arbitrary cuts that reverse the progress we have begun on rebuilding our strength and readiness,” he said.

The neocons concur. Writing in the Free Beacon, editor Matthew Continetti (who happens to be Bill Kristol’s son-in-law) warns that now is “the wrong time to cut defense.”

But I agree with the young neoconservative Continetti. I would never support cutting a penny of defense. However the Pentagon’s lost trillions have nothing to do with defense. That is money propping up the high lifestyles of those connected to the military-industrial complex.

Continetti and the neocons love to throw out bogeymen like China and Russia as excuses for more military spending, but in fact they are hardly objective observers. Look at how much the military contractors spend funding the neocon publications and neocon think tanks telling us that we need more military spending! All this money is stolen from the productive economy and diverted to enrich neocon cheerleaders at our expense.

Of course the real problem with the Pentagon and military spending in general is not waste, fraud, and abuse. It is not ten thousand dollar toilet seats or coffee mugs. The problem with military spending is the philosophy that drives it. If the US strategy is to maintain a global military empire, there will never be enough spending. Because there is never enough to control every corner of the globe. But if we are to return to a well-defended republic, military spending could easily be reduced by 75 percent while keeping us completely safe. The choice is ours!

 
• Category: Foreign Policy • Tags: American Military, Neocons 
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It’s not often that US Government officials are honest when they talk about our foreign policy. The unprovoked 2003 attack on Iraq was called a “liberation.” The 2011 US-led destruction of Libya was a “humanitarian intervention.” And so on.

So, in a way, Secretary of State Mike Pompeo was refreshingly honest last week when, speaking about newly-imposed US sanctions, he told the BBC that the Iranian leadership “has to make a decision that they want their people to eat.” It was an honest admission that new US sanctions are designed to starve Iranians unless the Iranian leadership accepts US demands.

His statement also reveals the lengths to which the neocons are willing to go to get their “regime change” in Iran. Just like then-Secretary of State Madeleine Albright said it was “worth it” that half a million Iraqi children died because of our sanctions on that country, Pompeo is letting us know that a few million dead Iranians is also “worth it” if the government in Tehran can be overthrown.

The US Secretary of State has demanded that Iran “act like a normal country” or the US would continue its pressure until Iran’s economy crumbles. How twisted is US foreign policy that Washington considers it “normal” to impose sanctions specifically designed to make life miserable – or worse – for civilians!

Is it normal to threaten millions of people with starvation if their leaders refuse to bow down to US demands? Is the neoconservative obsession with regime change “normal” behavior? Is training and arming al-Qaeda in Syria to overthrow Assad “normal” behavior? If so, then perhaps Washington’s neocons have a point. As Iran is not imposing sanctions, is not invading its neighbors, is not threatening to starve millions of Americans unless Washington is “regime-changed,” perhaps Iran is not acting “normal.”

So what is normal?

The continued Saudi genocide in Yemen does not bother Washington a bit. In fact, Saudi aggression in Yemen is viewed as just another opportunity to strike out at Iran. By making phony claims that Yemen’s Houthis are “Iran-backed,” the US government justifies literally handing the Saudis the bombs to drop on Yemeni school busses while claiming it is fighting Iranian-backed terrorism! Is that “normal”?

Millions of Yemenis face starvation after three years of Saudi attacks have destroyed the economy and a Saudi blockade prohibits aid from reaching the suffering victims, but Secretary Pompeo recently blamed Yemeni starvation on, you guessed it: Iran!

And in a shocking display of cynicism, the US government is reportedly considering listing Yemen’s Houthis as a “terrorist” organization for the “crime” of fighting back against Saudi (and US) aggression. Labeling the Yemeni resistance a “terrorist” organization would effectively “legalize” the ongoing Saudi destruction of Yemen, as it could be justified as just another battle in the “war on terror.” It would also falsely identify the real culprits in the Yemen tragedy as Iran, which is repeatedly and falsely called the “number one sponsor of terrorism” by Pompeo and the rest of the Trump Administration neocons.

So yes, Secretary of State Mike Pompeo told one wicked truth last week. But before he demands that countries like Iran start acting “normal” or face starvation, perhaps he should look in the mirror. Are Pompeo and the neocons “normal”? I don’t think so.

 
• Category: Foreign Policy • Tags: Donald Trump, Iran, Saudi Arabia 
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Sadly, but not unexpectedly, the mass shooting at the Tree of Life Synagogue in Pittsburgh is being used to justify new infringements on liberty. Of course, opponents of gun rights are claiming this shooting proves America needs more gun control. Even some who normally oppose gun control say the government needs to do more to keep guns out of the hands of the “mentally ill.” Those making this argument ignore the lack of evidence that background checks, new restrictions on the rights of those alleged to have a mental illness, or any other form of gun control would have prevented the shooter from obtaining a firearm.

Others are using the shooter’s history of posting anti-Semitic comments on social media to call for increased efforts by both government and social media websites to suppress “hate speech.” The shooter posted anti-Semitic statements on the social media site Gab. Gab, unlike Twitter and Facebook, does not block or ban users for offensive comments. After the shooting Gab was suspended by its internet service provider, and PayPal has closed the site’s account. This is an effort to make social media websites responsible for the content and even the actions of their users, turning the sites’ operators into thought police.

Some social media sites, particularly Facebook and Twitter, are eager to silence not just bigots but those using their platforms to advocate for liberty. Facebook has recently banned a number of libertarian pages— including Cop Block, a site opposing police misconduct. Twitter has also banned a number of conservatives and libertarians, as well as critics of American foreign policy. Some libertarians say we should not get upset as these are private companies exercising private property rights. However, these companies are working with government and government-funded entities such as the Atlantic Council, a group funded by NATO and the military-industrial complex, to determine who should and should not be banned.

The effort to silence “hate speech” is not just about outlawing racist, sexist, or anti-Semitic speech. The real goal is to discredit, and even criminalize, criticism of the welfare-warfare state by redefining such criticism as “hate.” It is not just progressives who wish to use laws outlawing “hate speech” to silence political opponents. Some neoconservatives want to criminalize criticism of Israel for the nonsensical reason that any criticism of Israel is “anti-Semitic.” Other right-wing authoritarians wish to expand hate crime laws to include crimes committed against police officers.

Ironically neoconservatives and other right-wing authoritarians are among the biggest purveyors of real “hate speech.” What could possibly be more hateful than speech advocating perpetual war? Cultural Marxists are also guilty of hate speech with their calls for both government and private violence against political opponents, and for the use of government force to redistribute property. Just about the only individuals advocating a political philosophy not based on hate are those libertarians who consistently advance the non-aggression principle.

Preserving the right to free speech is vital to preserving liberty. All who value freedom should fight efforts to outlaw “hate speech.” “Hate speech” laws may initially be used to target bigoted and other truly hateful speech, but eventually they will be used to silence all critics of the welfare-warfare state and the authoritarian philosophies that justify omnipotent government. To paraphrase Ludwig von Misses, libertarians must fight hate speech—including the hate speech emanating from Washington, D.C.— with the “ideas of the mind.”

 
• Category: Ideology • Tags: Censorship, Constitution, Gun Control 
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President Trump recently called the Federal Reserve’s interest rate hikes crazy. Leaving aside President Trump’s specific complaint, which is likely motivated by the belief that low rates will help him win reelection, he is right that “crazy” is a good way to describe the Federal Reserve.

When not forced to use a government-created currency, individuals have historically chosen to use a precious metal such as gold or silver as money. The reasons include that precious metals are durable and their value tends to remain relatively stable over time. A stable currency ensures that prices accurately convey the true value of goods and services.

A main value of a precious metal is it accurately conveys the true price of money, which is the Interest rate. If the interest rate reflects the manipulation of central bankers and not true market conditions, individuals will be unable to properly allocate resources between savings and current consumption.

In contrast to market money, government-created fiat currency is anything but stable. Central banks constantly increase and decrease the money supply in an attempt to control the economy by controlling the interest rates. This causes individuals to misread market conditions, leading to a misallocation of resources. This can create an illusion of prosperity. But eventually reality catches up to the Federal Reserve-created fantasies. When that happens, there is a recession or worse, leading the Fed to start the whole boom-and-bust cycle over again.

When central banks create money, those who first get the new money enjoy an increase in purchasing power before the new money causes a real increase in prices. Those who receive the money first are members of the banking and financial elite. By the time the new money reaches the middle class and working class, inflation has set in, so any gain in purchasing power is more than offset by the increase in inflation. Thus, central banking causes income inequality.

Since the Federal Reserve’s creation in 1913, the dollar has lost most of its value. The steady erosion of the dollar’s value punishes savers and rewards those who seek instant gratification even if it requires piling up massive debts. So the Federal Reserve is at least partially to blame for the rise of a culture that devalues thrift.

The very act of creating money and manipulating interest rates distorts the market. Therefore, the Federal Reserve System cannot be fixed with a “rules-based” monetary policy or even with “tying” the Fed-created money supply to the price of gold. It is amazing how many economists who oppose price controls on all other goods support allowing a secretive central bank to control the price of money.

Trusting the Federal Reserve to produce permanent prosperity instead of a boom-and-bust cycle is a textbook example of a popular definition of insanity being repeating the same action in hope of getting different results. The Federal Reserve System is as unworkable and doomed to failure as every other form of central planning.

It is likely that the next Fed-created recession will come sooner rather than later. This could be the major catastrophe that leads to the end of fiat currency. The only way to avoid crisis is to force Congress to end our monetary madness. The first steps are passing the Audit the Fed bill, allowing people to use alternative currencies, and exempting all transactions in precious metals and cryptocurrencies from capital gains taxes and other taxes.

 
• Category: Economics • Tags: Donald Trump, Federal Reserve 
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The Saudi version of the disappearance and murder of journalist Jamal Khashoggi seems to change every day or so. The latest is the Saudi government claim that the opposition journalist was killed in a “botched interrogation” at the Saudi consulate in Istanbul. Or was it a fist-fight? What is laughable is that the Saudi king has placed Crown Prince Mohammad bin Salman, a prime suspect, in charge of the investigation of Khashoggi’s murder!

Though the official story keeps changing, what is unlikely to change is Washington’s continued relationship with Saudi Arabia. It is a partnership that is in no way beneficial to Americans or the US national interest.

President Trump has promised “severe punishment” if the Saudi government is found to have been involved in Khashoggi’s murder, but he also took off the table any reduction in arms sales to prop up the murderous Saudi war on Yemen. It’s all about jobs, said President Trump. So the Saudi killing of thousands in Yemen can go on. Some murders are more important than others, obviously.

The killing of Khashoggi puts the Trump Administration is in a difficult situation. President Trump views Iran as designated enemy number one. Next month the US Administration intends to impose a new round of sanctions designed to make it impossible for Iran to sell its oil on the international market. To keep US fuel prices from spiking over this move Trump is relying on other countries, especially Saudi Arabia, to pump more and make up the difference. But the Saudis have threatened $400 a barrel oil if President Trump follows through with his promise of “severe punishment” over the killing of Khashoggi.

The Saudis have also threatened to look for friendship in Moscow or even Tehran if Washington insists on “punishing” the regime in Riyadh. For a super-power, the US doesn’t seem to have many options.

What whole mess reveals is just how wise our Founding Fathers were to warn us against entangling alliances. For too many decades the US has been in an unhealthy relationship with the Saudi kingdom, providing the Saudis with a US security guarantee in exchange for “cheap” oil and the laundering of oil profits through the US military-industrial complex by the purchase of billions of dollars in weapons.

This entangling relationship with Saudi Arabia should end. It is unfortunate that the tens of thousands of civilians dead from Yemen to Syria due to Saudi aggression don’t matter as much as the murder of one establishment journalist like Khashoggi, but as one Clinton flack once said, we should not let this current crisis go to waste.

This is not about demanding that the Saudis change their ways, reform their society on the lines of a liberal democracy, or allow more women to drive. The problem with our relationship with Saudi Arabia is not about Saudi Arabia. It is about us. The United States should not be in the business of selling security guarantees overseas to the highest bidder. We are constantly told that the US military guarantees our own safety and so it should be.

No, this is about returning to a foreign policy that seeks friendship and trade with all nations who seek the same, but that heeds the warning of George Washington in his Farewell Address that “a passionate attachment of one nation for another produces a variety of evils.” If we care about the United States we must heed this warning. No more passionate attachments overseas. Friendship and trade over all.

 
• Category: Foreign Policy • Tags: Khashoggi, Saudi Arabia 
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September marked a decade since the bursting of the housing bubble, which was followed by the stock market meltdown and the government bailout of the big banks and Wall Street. Last week’s frantic stock market sell-off indicates the failure to learn the lesson of 2008 makes another meltdown inevitable.

In 2001-2002 the Federal Reserve responded to the economic downturn caused by the bursting of the technology bubble by pumping money into the economy. This new money ended up in the housing market. This was because the so-called conservative Bush administration, like the “liberal” Clinton administration before it, was using the Community Reinvestment Act and government-sponsored enterprises Fannie Mae and Freddie Mac to make mortgages available to anyone who wanted one — regardless of income or credit history.

Banks and other lenders eagerly embraced this “ownership society”’ agenda with a “lend first, ask questions when foreclosing” policy. The result was the growth of subprime mortgages, the rush to invest in housing, and millions of Americans finding themselves in homes they could not afford.

When the housing bubble burst, the government should have let the downturn run its course in order to correct the malinvestments made during the phony, Fed-created boom. This may have caused some short-term pain, but it would have ensured the recovery would be based on a solid foundation rather than a bubble of fiat currency.

Of course Congress did exactly the opposite, bailing out Wall Street and the big banks. The Federal Reserve cut interest rates to historic lows and embarked on a desperate attempt to inflate the economy via QE 1, 2, and 3.

Low interest rates and quantitative easing have left the Fed with a dilemma. In order to avoid a return to 1970s-era inflation — or worse, it must raise interest rates and draw down its balance sheet. However, raising rates too much risks popping what financial writer Graham Summers calls the “everything bubble.”

Today credit card debt is over a trillion dollars, student loan debt is at 1.5 trillion dollars, there is a bubble in auto loans, and there is even a new housing bubble. But the biggest part of the everything bubble is the government bubble. Federal debt is over 21 trillion dollars and expanding by tens of thousands of dollars per second.

The Fed is unlikely to significantly raise interest rates because doing so would cause large increases in federal government debt interest payments. Instead, the Fed will continue making small Increases while moving slowly to unwind its balance sheet, hoping to gradually return to a “normal” monetary policy without bursting the “everything bubble.”

The Fed will be unsuccessful in keeping the everything bubble from exploding. When the bubble bursts, America will experience an economic crisis much greater than the 2008 meltdown or the Great Depression.

This crisis is rooted in the failure to learn the lessons of 2008 and of every other recession since the Fed’s creation: A secretive central bank should not be allowed to manipulate interest rates and distort economic signals regarding market conditions. Such action leads to malinvestment and an explosion of individual, business, and government debt. This may cause a temporary boom, but the boom soon will be followed by a bust. The only way this cycle can be broken without a major crisis is for Congress both to restore people’s right to use the currency of their choice and to audit and then end the Fed.

 
• Category: Economics • Tags: Federal Reserve, Financial Crisis 
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Last week the United States, Mexico, and Canada agreed to replace the North American Free Trade Agreement (NAFTA) with a new United States-Mexico-Canada Agreement (USMCA). Sadly, instead of replacing NAFTA’s managed trade with true free trade, the new USMCA expands government’s control over trade.

For example, under the USMCA’s “rules of origin,” at least 75 percent of a car’s parts must be from the US, Canada, or Mexico in order to avoid tariffs. This is protectionism designed to raise prices of cars using materials from outside North America.

The USMCA also requires that 40 to 45 percent of an automobile’s content be made by workers earning at least 16 dollars per hour. Like all government-set wages, this requirement will increase prices and decrease employment.

The USMCA also requires Mexico to pass legislation recognizing the “right of collective bargaining.” In other words, this so-called free trade agreement forces Mexico to import US-style compulsory unionism. If the Mexican legislature does not comply, the US and Canada will impose tariffs on Mexican goods.

The USMCA also requires the three countries to abide by the International Labour Organization (ILO) standards for worker rights. So, if, for example, the bureaucrats at the ILO declared that Right to Work laws violate “international labor standards”’ because they weaken collective bargaining and give Right to Work states an unfair advantage over compulsory unionism states and countries, the federal government may have to nullify all state Right to Work laws.

The USMCA also obligates the three countries to work together to improve air quality. This sounds harmless but could be used as a backdoor way to impose costly new regulations and taxes, such as a cap-and-trade scheme, on America.

This agreement also forbids the use of currency devaluation as a means of attempting to gain a competitive advantage in international trade. Enforcement of this provision will be difficult if not impossible, as no central bank will ever admit it is devaluing currency to obtain a competitive advantage in international trade. Of course, given that the very act of creating money lowers its value, the only way to stop central banks from devaluing currency is to put them out of business. Sadly, I don’t think the drafters of the USMCA seek to restore free-market money.

The currency provision will likely be used to justify coordination of monetary policy between the Federal Reserve and the Mexican and Canadian central banks. This will lead to region-wide inflation and a global currency war as the US pressures Mexico and Canada to help the Fed counter other countries’ alleged currency manipulation and challenges to the dollar’s reserve currency status.

A true free trade deal would simply reduce or eliminate tariffs and other trade barriers. It would not dictate wages and labor standards, or require inter-governmental cooperation on environmental standards and monetary policy. A true free trade deal also would not, as the USMCA does, list acceptable names for types of cheeses.

Those of us who support real free trade must not let supporters of the USMCA get away with claiming the USMCA has anything to do with free trade. We must also fight the forces of protectionism that are threatening to start a destructive trade war. Also, we must work to stop the government from trying to control our economic activities through regulations, taxes, and (most importantly) control of the currency through central banking and legal tender laws.

 
• Category: Economics, Ideology • Tags: Free Trade